FX.co ★ Analysis and trading tips for GBP/USD on January 21

Analysis of transactions in the GBP / USD pair

A signal to sell emerged after GBP/USD hit 1.3617. However, the downside potential was limited because the MACD line was in the oversold area. On its second test, the market signal turned to buy, but it led to losses.

A similar scenario occurred in the afternoon, around 1.3637. The MACD line was far above zero, so the upside potential was limited. On its second test, the market signal was to sell, but the pound continued to grow, leading to losses.

Data on UK industrial orders did not lead to serious market changes, so pound traded horizontally for the entire first half of Thursday. In the afternoon, a strong report on Philadelphia Fed manufacturing activity came out, evoking higher demand for dollar.

Today, the UK will release data on retail sales, and that could lead to a surge in volatility provided that the figures exceed expectations. Bank of England MPC member Katherine L. Mann will also make a speech, but it is unlikely to have a significant impact on the market. In the afternoon, the US will release data on leading indicators, but that is also unlikely to have effects on the market. More important is the speech of Treasury Secretary Janet Yellen as that is likely to focus on inflation, which is a serious threat to the economy.

For long positions:

Buy pound when the quote reaches 1.3605 (green line on the chart) and take profit at the price of 1.3634 (thicker green line on the chart). Growth will continue if data on UK retail sales exceed expectations.

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 1.3587, however, the MACD line should be in the oversold area as only by that will the market reverse to 1.3605 and 1.3634.

For short positions:

Sell pound when the quote reaches 1.3587 (red line on the chart) and take profit at the price of 1.3555. Pressure will return in case of weak UK data and increased bearish sentiment, prompted by hawkish actions of the Federal Reserve.

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 1.3605, but the MACD line should be in the overbought area, as only by that will the market reverse to 1.3587 and 1.3555.

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.