FX.co ★ Analysis and trading recommendations for GBP/USD on October 25

Analysis of transactions in the GBP / USD pair

There was a signal to sell in GBP / USD last Friday, but the decrease was limited because the MACD line was far away from zero. Fortunately, after that, another sell signal appeared, and this time it coincided with the MACD being at the overbought area. This allowed bearish traders to take short positions, provoking a 25-pip decline in the pair

Pound rallied last Friday, thanks to strong PMI reports from the UK. However, the situation turned around after the bulls failed to provoke a breakout at 1.3809. The event formed a sell signal in the pair, indicating clearly the intention of buyers to close positions during the weekend. Very strong PMI data from the US also pushed pound to weekly lows.

Today, traders should pay attention to the speech of Bank of England member Silvana Tenreyro as she may discuss potential changes on the monetary policy. But since there are no UK statistics scheduled to be published, volatility should remain low, which will keep GBP / USD in a flat market.

For long positions:

Open a long position when pound reaches 1.3786 (green line on the chart) and take profit at 1.3831 (thicker green line on the chart). However, there is little chance that the pair will rise today, unless the Bank of England makes statements that are in favor of the currency. If that happens, it is likely that the quote will return to weekly highs

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 1.3762, but the MACD line should be in the oversold area, as only by that will the market reverse to 1.3786 and 1.3831.

For short positions:

Open a short position when pound reaches 1.3762 (red line on the chart) and take profit at 1.3724. There is a high chance that the pair will decline and and continue the downward trend observed last week.

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 1.3786, but the MACD line should be in the overbought area, as only by that will the market reverse to 1.3762 and 1.3724.

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.