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

Analysis of transactions in the GBP / USD pair

The first test of 1.1266 happened when the MACD line moved down a lot from zero, limiting the upside potential of the pair. A little later, another test took place, but this time there was an upward correction of about 15 pips. Pressure returned after that, but no other signals appeared in the market.

The latest UK inflation data hurt pound as prices continued to rise, making life difficult for the central bank and forcing it to continue to be more aggressive on interest rates. The speech by Bank of England MPC member Katherine L. Mann went unnoticed.

Today, there are no statistics on the UK, so it is possible that pressure will continue and could lead to another sell-off to new weekly lows. In the afternoon, there are interesting reports in the US, such as the weekly jobless claims, index of manufacturing activity and sales in the secondary housing market. FOMC members will also deliver speeches, where they are likely to be hawkish as the Fed continues to prepare markets for another rate hike.

For long positions:

Buy pound when the quote reaches 1.1255 (green line on the chart) and take profit at the price of 1.1341 (thicker green line on the chart). Growth could occur, but it is unlikely to be strong and stable. Nevertheless, remember that when buying, the MACD line should be above zero or is starting to rise from it.

Pound can also be bought at 1.1197, however, the MACD line should be in the oversold area as only by that will the market reverse to 1.1255 and 1.1341.

For short positions:

Sell pound when the quote reaches 1.1197 (red line on the chart) and take profit at the price of 1.1125. Pressure will return if there is no demand from buyers in the morning and there are strong US statistics in the afternoon. But take note that when selling, the MACD line should be below zero or is starting to move down from it.

Pound can also be sold at 1.1255, however, the MACD line should be in the overbought area, as only by that will the market reverse to 1.1197 and 1.1125.

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 decision based on the current market situation is an inherently losing strategy for an intraday trader.