FX.co ★ Analysis and trading tips for GBP/USD on March 23

Analysis of transactions in the GBP / USD pair

A signal to buy emerged after GBP/USD hit 1.3120. Coincidentally, the MACD line was at the oversold area, so the pair rose by more than 100 pips. Then, it increased further after reaching 1.3141 and prompted a sell-off at 1.3198. However, that resulted in losses because the bull market prevented the pound from correcting down properly.

GBP/USD rose on Tuesday, thanks to the positive attitude of traders on the UK economy. That is because the government managed to save about £26 billion last year, which can be used to support the economy this year.

UK's February inflation report will be released today, and it is unlikely that the data will differ from the forecasts. But in the event that it is much larger than expected, the Bank of England will be forced to change its plan on monetary policy. A more hawkish approach will prompt a further rally in the pound.

In the afternoon, representatives of the Federal Reserve System will speak, and they will most likely hint at further increases in interest rates. Last Monday, Fed Chairman Jerome Powell already expressed his opinion on the need to raise the rate by 0.5% at the next Fed meeting.

US new home sales are also due today, as well as interviews by FOMC members Mary Daly and James Bullard.

For long positions:

Buy pound when the quote reaches 1.3300 (green line on the chart) and take profit at the price of 1.3364 (thicker green line on the chart). A rally will occur if Andrew Bailey is hawkish on monetary policy, announcing a larger increase in interest rates at the next meetings. But 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 1.3269, however, the MACD line should be in the oversold area as only by that will the market reverse to 1.3300 and 1.3364.

For short positions:

Sell pound when the quote reaches 1.3269 (red line on the chart) and take profit at the price of 1.3077. Pressure will return if the Bank of England takes a softer approach on monetary policy. However, positive expectations over the new annual budget of the UK could bring bank risk appetite.

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 1.3300, however, the MACD line should be in the overbought area, as only by that will the market reverse to 1.3269 and 1.3209.

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.