Analysis of Trades and Trading Recommendations for the British Pound

The price test at 1.2691 coincided with the MACD indicator starting to move upward from the zero mark, confirming a valid entry point for buying the pound. As a result, the pair rose by 25 pips.

Yesterday's U.S. economic data came in below expectations, creating conditions for a weaker dollar and increased interest in other currencies, including the British pound. Support from Federal Reserve Chair Jerome Powell, who emphasized a cautious approach to monetary policy, also played a role. Dovish statements highlighting the likelihood of easing monetary policy suggest that the Fed is prepared to act in the interest of economic growth, even if it involves compromises on inflation. In light of these developments, the pound received a substantial boost, providing an opportunity to test monthly highs. Investors will closely monitor upcoming economic data and statements from the Bank of England, which may influence the currency's future trajectory. If dollar weakness persists, it could push the pound to even higher levels.

Today's PMI report for the UK construction sector will be closely watched by traders hoping for positive dynamics, which could indicate accelerated recovery rates. While the index remains above the critical 50-point threshold, it is nearing a key level, reflecting challenges many construction companies face, such as material shortages and rising costs. Additionally, a speech by BoE Monetary Policy Committee member Megan Greene will garner attention. She will likely stress the importance of monitoring inflation expectations and their impact on economic growth.

I plan to rely primarily on executing Scenario 1 and Scenario 2.

Buy Scenarios

Scenario #1:

I plan to buy the pound today if the entry point near 1.2725 (green line on the chart) is reached, aiming for growth to the 1.2770 level (thicker green line on the chart). Around 1.2770, I intend to exit purchases and open sales in the opposite direction, targeting a movement of 30–35 pips from the entry-level. Counting on the pound's growth today is reasonable only if favorable data is released.

Important! Before buying, ensure the MACD indicator is above the zero mark and starting to rise.

Scenario #2:

I also plan to buy the pound today if there are two consecutive tests of the 1.2698 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 toward the opposite levels of 1.2725 and 1.2770 can be expected.

Sell Scenarios

Scenario #1:

I plan to sell the pound today after breaking below the 1.2698 level (red line on the chart), which should lead to a quick drop in the pair. The key target for sellers will be 1.2662, where I intend to exit sales and immediately open purchases in the opposite direction, targeting a movement of 20–25 pips from the level. Selling the pound is feasible, but doing so at higher levels is better.

Important! Before selling, ensure the MACD indicator is below the zero mark and just starting to fall from it.

Scenario #2:

I also plan to sell the pound today if there are two consecutive tests of the 1.2725 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. Declines toward the opposite levels of 1.2698 and 1.2662 can be expected.

What's on the Chart:

• 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 Notes for Beginner Forex 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.