Analysis of Trades and Trading Tips for the British Pound
The initial price test at 1.2930 occurred when the MACD indicator had dropped significantly below the zero mark, which limited the downside potential of the pair. For this reason, I decided not to sell the pound. Shortly after, the second test of 1.2930 took place when the MACD was in the oversold area. This allowed for the second scenario to unfold, leading to a 40-pip rise in the pound.
According to data released yesterday, the U.S. Consumer Price Index rose by only 0.2% in February, following a sharp 0.5% increase in January. This slower inflation growth weakened the dollar by increasing the likelihood of the Federal Reserve lowering interest rates in the near future, which triggered new purchases of the British pound. This moderate increase in inflation may encourage the Fed to continue cutting rates, further weakening the dollar and sustaining the bullish trend in GBP/USD. However, it is essential to recognize that the Fed's decisions are influenced by multiple factors beyond a single inflation report. The resilience of the labor market, the global economic situation, and geopolitical risks also play crucial roles. Therefore, it is premature to assume that rate cuts are unavoidable.
Today, there are no significant economic reports scheduled for the UK, so we can expect the pound's growth in the ongoing uptrend to continue.
For intraday strategy, I will primarily rely on Scenarios #1 and #2.
Buy Signal
Scenario #1: Today, I plan to buy the pound when the entry point reaches around 1.2963 (green line on the chart), aiming for a rise to 1.2999 (thicker green line on the chart). Around 1.2999, I plan to exit my buy positions and open sell trades in the opposite direction, expecting a movement of 30-35 pips back from the level. A further rise in the pound can be expected as part of the ongoing uptrend. Important! Before buying, ensure that the MACD indicator is above the zero mark and starting to rise.
Scenario #2: I plan to buy the pound today if the price tests 1.2945 twice a row while the MACD is in the oversold area. This will limit the pair's downside potential and lead to an upward market reversal. A rise to the opposite levels of 1.2963 and 1.2999 can be expected.
Sell Signal
Scenario #1: Today, I plan to sell the pound after the price breaks below 1.2945 (red line on the chart), which will lead to a rapid decline in the pair. The key target for sellers will be 1.2914, where I plan to exit my sell trades and immediately open buy positions in the opposite direction, expecting a movement of 20-25 pips back from the level. It is better to sell the pound at the highest possible levels. Important! Before selling, ensure that the MACD indicator is below the zero mark and starting to decline.
Scenario #2: I also plan to sell the pound today if the price tests 1.2963 twice in a row while the MACD is in the overbought area. This will limit the pair's upside potential and lead to a market reversal downward. A decline to the opposite levels of 1.2945 and 1.2914 can be expected.
What's on the Chart:
- The thin green line represents the entry price where the trading instrument can be bought.
- The thick green line indicates the expected price level where a Take Profit order can be placed, or profits can be manually secured, as further price growth above this level is unlikely.
- The thin red line represents the entry price where the trading instrument can be sold.
- The thick red line indicates the expected price level where a Take Profit order can be placed, or profits can be manually secured, as further price decline below this level is unlikely.
- The MACD indicator should be used to assess overbought and oversold zones when entering the market.
Important Notes:
- Beginner Forex traders should exercise extreme caution when making market entry decisions. It is advisable to stay out of the market before the release of important fundamental reports to avoid exposure to sharp price fluctuations. If you choose to trade during news releases, always use stop-loss orders to minimize potential losses. Trading without stop-loss orders can quickly wipe out your entire deposit, especially if you neglect money management principles and trade with high volumes.
- Remember, successful trading requires a well-defined trading plan, similar to the one outlined above. Making impulsive trading decisions based on the current market situation is a losing strategy for intraday traders.
