The price test at 1.2406 occurred when the MACD indicator had already dropped significantly below the zero mark, which limited further downside potential. Consequently, I decided against selling the pound. After the pair's sharp decline, the test at 1.2366, from which I had planned to buy on a rebound (as mentioned in yesterday's afternoon forecast), allowed me to capture a 30-pip move from the market.
Yesterday, statements from Andrew Bailey regarding potential rate cuts weakened the pound's position. The proposed rate cuts, aimed at stimulating credit and consumer spending, triggered a negative reaction in the market. Following the release of economic forecasts, investors began to question the stability of the UK economy, leading to continued sell-offs of the pound. Economists predict that this situation will perpetuate uncertainty regarding the UK's economic outlook, increasing the likelihood of further weakness against the U.S. dollar.
Today, in the absence of major economic data, investors are focusing on Huw Pill's speech. His comments could significantly influence market sentiment and expectations related to monetary policy. Any hints about rate changes or criticism of current measures could increase volatility. Given the pound's signs of instability, markets are looking for clear signals about the Bank of England's future actions. If his remarks are negative, selling pressure on the pound may return.
For intraday trading, I will mainly rely on Scenario #1 and Scenario #2.
Scenario #1: I plan to buy the pound at 1.2435 (green line on the chart), targeting 1.2470 (thicker green line on the chart). At 1.2470, I will exit long positions and initiate a short trade in the opposite direction, aiming for a 30–35 pip pullback. A pound rally is only likely if a Bank of England representative adopts a hawkish stance. Important! Before buying, ensure that the MACD indicator is above the zero mark and beginning to rise.
Scenario #2: Another buying opportunity arises if 1.2415 is tested twice in succession, with MACD in the oversold zone. This would limit the pair's downside potential and lead to an upward reversal. Expected targets for this scenario are 1.2435 and 1.2470.
Sell SignalScenario #1: I plan to sell the pound after a breakout below 1.2415 (red line on the chart), which could trigger a quick decline in the pair. The primary bearish target is 1.2382, where I will exit short positions and immediately enter a buy trade in the opposite direction, aiming for a 20–25 pip rebound. The higher the selling entry, the better. Important! Before selling, ensure that the MACD indicator is below the zero mark and beginning to decline.
Scenario #2: I will also sell the pound if 1.2435 is tested twice in succession, with MACD in the overbought zone. This would limit the pair's upside potential and lead to a downward reversal. Expected downside targets are 1.2415 and 1.2382.