Analysis of Trades and Trading Tips for the British Pound
The test of the 1.2698 level occurred when the MACD indicator had already moved significantly above the zero mark, which limited the pair's upward potential. Shortly afterward, there was another test of 1.2698, with the MACD indicator in the overbought area. This allowed Scenario #2 for selling to play out, resulting in a decline in the pair.
Yesterday's UK labor market data had a positive impact on the pound. The unemployment rate remained unchanged, signaling a stable labor market. A slight increase in new job openings and wage growth underscored positive trends, bolstering trader confidence.
Today, attention shifts to the Consumer Price Index report for the UK, which is expected to spark intense discussion among economists and market participants. A rise in CPI could indicate growing inflationary pressures in the economy, which may compel the Bank of England to reconsider its monetary policy stance. As prices for goods and services continue to rise, the central bank needs to take decisive measures to curb inflation. One of the main tools available to the BoE is adjusting the base interest rate. An increase in the rate could help temper consumer spending, thereby reducing inflationary pressure. While this would support the British pound, in the medium term, it could harm the broader economy, which currently needs stimulus.
For today's trading strategy, I will primarily rely on implementing Scenario #1 and Scenario #2.
Buy Signal
Scenario #1: I plan to buy the pound today upon reaching the entry point near 1.2720 (green line on the chart), with a target of rising to 1.2751 (thicker green line on the chart). Around 1.2751, I plan to exit the buy positions and open sell positions in the opposite direction (anticipating a 30–35 pips movement from the entry point). Pound appreciation today can only be expected after strong economic data. Important! Before buying, ensure that the MACD indicator is above the zero mark and beginning to rise.
Scenario #2: I also plan to buy the pound today if there are two consecutive tests of the 1.2694 price level, with the MACD indicator in the oversold area. This will limit the pair's downward potential and lead to an upward market reversal. Growth can be expected toward the opposite levels of 1.2720 and 1.2751.
Sell Signal
Scenario #1: I plan to sell the pound today after breaking below the 1.2694 level (red line on the chart), which will lead to a sharp decline in the pair. The key target for sellers will be the 1.2668 level, where I plan to exit the sell positions and immediately open buy positions in the opposite direction (anticipating a movement of 20–25 pips from the level). Selling the pound is only advisable in case of a sharp drop in UK inflation data. Important! Before selling, ensure that the MACD indicator is below the zero mark and beginning to decline.
Scenario #2: I also plan to sell the pound today if there are two consecutive tests of the 1.2720 price level, with the MACD indicator in the overbought area. This will limit the pair's upward potential and lead to a market reversal downward. A decline can be expected toward the opposite levels of 1.2694 and 1.2668.
Chart Notes
- Thin green line: Entry price for buying the trading instrument.
- Thick green line: A suggested target for Take Profit or manually locking in profits, as further growth above this level is unlikely.
- Thin red line: Entry price for selling the trading instrument.
- Thick red line: A suggested target for Take Profit or manually locking in profits, as further decline below this level is unlikely.
- MACD Indicator: Critical for identifying overbought and oversold zones to guide market entry decisions.
Important Note for Beginner Traders
- Always approach market entry decisions cautiously.
- Avoid trading during major news releases to sidestep volatile price swings.
- If trading during news releases, always set stop-loss orders to minimize losses.
- Trading without stop-loss orders or money management practices can quickly deplete your deposit, especially when using large volumes.
- A clear trading plan, like the one outlined above, is essential for successful trading. Spontaneous trading decisions based on current market conditions are inherently disadvantageous for intraday traders.
