Trade Analysis and Trading Tips for the British Pound

The test of the 1.3395 level occurred just as the MACD indicator was beginning to move upward from the zero line, confirming that it was an appropriate entry point for a long position on the pound. However, the pound gained only 5 points before selling pressure returned to the pair.

Last Friday, the pound came under pressure from the dollar following the US labor market report, and even the Bank of England's decision failed to prevent its decline. On Thursday, the central bank raised its interest rate to 4.00%, with a unanimous 9-0-0 vote. However, Andrew Bailey immediately qualified the decision, stating that a second rate hike would only be possible if energy prices returned to their previous levels. The market viewed a December rate hike as equally likely and unlikely, putting the probability at 50%. As a result, the pound received little support. US economic data were released shortly afterward. Nonfarm payrolls increased by 165,000, compared with a forecast of 65,000 and the previous month's figure of 60,000. The unemployment rate fell to 4.1%, while monthly wage growth reached 0.4%, against expectations of 0.3%. This was enough to strengthen expectations regarding the Federal Reserve's interest rate policy, and demand for the dollar outweighed the positive impact of the Bank of England's decision. Furthermore, UK domestic data were disappointing. The Lloyds House Price Index fell by 0.6% month over month and 1.2% year over year in October, significantly underperforming expectations. This highlights the pressure that high borrowing costs are placing on the housing market.

The pound enters the first half of the week in a wait-and-see mode. No UK economic data are scheduled for release, and attention is focused entirely on Andrew Bailey's speech. However, the market is unlikely to expect any significant new signals from him. Therefore, without unexpected hawkish comments from Bailey or a weakening of the dollar, a recovery in GBP/USD is likely to remain difficult.

As for the intraday trading strategy, the focus will be primarily on implementing Scenarios #1 and #2.

Buy Signals

Scenario #1: The pound can be bought today if the price reaches the entry level around 1.3386 (the thin green line on the chart), with an upward target of 1.3407 (the thicker green line on the chart). Around 1.3407, the long position will be closed and a short position opened in anticipation of a 30–35-point move in the opposite direction from that level. Any upward movement in the pound today is likely to be limited to a corrective rebound. Important! Before buying, make sure that the MACD indicator is above the zero line and has only just started rising from it.

Scenario #2: The pound can also be bought today if the price tests the 1.3369 level twice consecutively while the MACD indicator is in oversold territory. This would limit the pair's downward potential and trigger an upward market reversal. A rise toward the opposite levels of 1.3386 and 1.3407 can then be expected.

Sell Signals

Scenario #1: The pound can be sold today after the price breaks below the 1.3369 level (the red line on the chart), which could trigger a rapid decline in the pair. The sellers' main target will be 1.3348, where the short position will be closed and a long position opened immediately in the opposite direction, targeting a 20–25-point move upward from that level. Negative economic data could renew selling pressure on the pound. Important! Before selling, make sure that the MACD indicator is below the zero line and has only just started declining from it.

Scenario #2: The pound can also be sold today if the price tests the 1.3386 level twice consecutively while the MACD indicator is in overbought territory. This would limit the pair's upward potential and trigger a downward market reversal. A decline toward the opposite levels of 1.3369 and 1.3348 can then be expected.

What the Chart Shows

• Thin green line – the entry price at which the trading instrument can be bought.
• Thick green line – the estimated price level at which Take Profit orders can be placed or profits can be closed manually, as further upward movement above this level is considered unlikely.
• Thin red line – the entry price at which the trading instrument can be sold.
• Thick red line – the estimated price level at which Take Profit orders can be placed or profits can be closed manually, as further downward movement below this level is considered unlikely.
• MACD indicator. When entering the market, it is important to take overbought and oversold conditions into account.

Important. Beginner Forex traders should exercise extreme caution when making trading decisions. Before the release of major fundamental reports, it is generally best to stay out of the market to avoid exposure to sharp exchange rate fluctuations. If trading during news releases, always use stop-loss orders to minimize potential losses. Without stop-loss orders, the entire trading account can be depleted very quickly, especially when money management rules are not followed and large position sizes are used.

It is also important to remember that successful trading requires a clear trading plan, such as the one outlined above. Making spontaneous trading decisions based on current market conditions is fundamentally a losing strategy for an intraday trader.