Analysis of Trades and Trading Tips for the British Pound
The price test at 1.3378 in the second half of the day occurred when the MACD indicator had already advanced significantly above the zero line, which limited the pair's upside potential. Shortly afterward, a second test of 1.3378 coincided with a decline in the MACD from overbought territory, triggering Sell Scenario #2, resulting in a drop of more than 30 pips.
The pound recovered well yesterday thanks to strong UK services sector activity data and weak U.S. trade balance figures. Like a well-played chess game, this combination allowed the British currency to recoup lost ground and restore investor optimism. The stronger-than-expected services data confirmed the resilience of the UK economy despite ongoing inflation risks. As the main growth engine, the services sector demonstrated its vitality—a positive market signal.
On the flip side, weak U.S. trade balance figures increased pressure on the dollar. A widening trade deficit suggests reduced competitiveness of the U.S. economy, negatively affecting the dollar's value.
The UK construction PMI for April is due. This index captures fluctuations in business activity in one of the UK's key industries. A rising PMI indicates sector expansion, new orders, increased employment, and optimism among construction firms. A decline, by contrast, points to slowing growth, reduced output, and increasing uncertainty. This report is particularly important in today's economic climate to assess the sector's resilience and near-term outlook.
For intraday strategy, I will focus primarily on Scenarios #1 and #2.
Buy Scenario
Scenario #1: Plan to buy the pound today if the entry point around 1.3366 (green line on the chart) is reached, targeting a rise to 1.3405 (thicker green line). At 1.3405, I intend to exit long and open short positions, anticipating a 30–35 pip pullback.
Important: Before buying, ensure the MACD is above the zero line and starting to rise from it.
Scenario #2: I also plan to buy the pound if there are two consecutive tests of 1.3341, while the MACD is in the oversold zone. This setup would limit the downside potential and lead to an upward market reversal. A move toward 1.3366 and 1.3405 can be expected.
Sell Scenario
Scenario #1: Plan to sell the pound after a break below 1.3341 (red line on the chart), which should lead to a sharp decline. The key target for sellers will be 1.3310, where I plan to exit shorts and initiate long positions in the opposite direction (20–25 pip reversal expected). Selling is appropriate after a failed attempt to hold the previous day's high or following weak data.
Important: Before selling, ensure the MACD is below the zero line and beginning to fall from it.
Scenario #2: I also plan to sell the pound if there are two consecutive tests of 1.3366 while the MACD is in the overbought zone. This would cap the pair's upside potential and lead to a downward reversal. A drop to 1.3341 and 1.3310 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.
