FX.co ★ Analysis and trading recommendations for GBP/USD on October 20

Analysis of transactions in the GBP / USD pair

There was a signal to buy in GBP / USD on Tuesday, but the increase was limited because the MACD line was far away from zero. Then, after that, there was a signal to sell, and this time it provoked a 40-pip decrease because the MACD line was at the overbought area, which allowed traders to safely take short positions.

Pound rallied, thanks to the statements of Bank of England Governor Andrew Bailey. He addressed the ongoing problems with inflation, invigorating the risk appetite of traders.

Rally may continue today after the release of the UK CPI report for September. But the movement will be little, unless the figure exceeds forecasts. In the afternoon, there are no important US statistics, but lately the market is more responsive to the statements of the Federal Reserve. As such, traders should pay attention to interviews of Fed members Charles Evans, Raphael Bostic and Randal Quarles.

For long positions:

Open a long position when pound reaches 1.3813 (green line on the chart) and take profit at 1.3853 (thicker green line on the chart). Price will jump if UK releases strong macro statistics.

Before buying, make sure that the MACD line is above zero, or is starting to rise from it. It is also possible to buy at 1.3790, but the MACD line should be in the oversold area, as only by that will the market reverse to 1.3813 and 1.3853.

For short positions:

Open a short position when pound reaches 1.3790 (red line on the chart) and take profit at 1.3755. Pressure may return if the attempt to break above the weekly high is unsuccessful. Weak data on UK inflation will also push GBP / USD down.

Before selling, make sure that the MACD line is below zero, or is starting to move down from it. Pound can also be sold at 1.3813, but the MACD line should be in the overbought area, as only by that will the market reverse to 1.3790 and 1.3755.

What's on the chart:

The thin green line is the key level at which you can place long positions in the GBP / USD pair.

The thick green line is the target price, since the quote is unlikely to move above this level.

The thin red line is the level at which you can place short positions in the GBP / USD pair.

The thick red line is the target price, since the quote is unlikely to move below this level.

MACD line - when entering the market, it is important to be guided by the overbought and oversold zones.

Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes.

And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decisions based on the current market situation is an inherently losing strategy for an intraday trader.