The test of the 1.3459 level occurred when the MACD indicator was just beginning to move higher from the zero line, confirming a valid entry point for long positions. As a result, the pair advanced by 15 points.
The July UK business activity report came in convincingly strong, providing support for the pound. The services sector, which accounts for the largest share of the UK economy, returned to growth for the first time in three months, while the Composite PMI for the private sector rose to 52.2 from 49.3, moving back into expansion territory for the first time since April. As these indices are leading indicators that are among the first to reflect shifts in business sentiment, their improvement provided an important signal of economic recovery. Nevertheless, the pound reacted with only modest gains, as concerns over the labor market tempered investors' enthusiasm. Employment in the services sector has now declined for the 22nd consecutive month. This troubling contrast with the broader economic recovery prompted market participants to view the report with caution. Although the data supported the pound, the sustainability of its gains against the U.S. dollar remains uncertain.
During the second half of the day, the pound's direction will largely be determined by U.S. economic events, as there are no major domestic catalysts scheduled for the UK. Investors will focus on the ISM Services PMI, the Composite PMI, the ADP Employment Change report, and remarks from FOMC member Lisa Cook. The PMI data provide insight into business activity, the ADP report serves as an early indicator of labor market conditions, and comments from Federal Reserve officials help shape expectations regarding future monetary policy. Together, these events are likely to influence the direction of the U.S. dollar. Until the data are released, the pound is likely to track overall market risk sentiment. However, heightened volatility is expected during the U.S. session, and the outcome may ultimately favor the dollar.
As for my intraday strategy, I will primarily rely on the implementation of Scenario #1 and Scenario #2.
Scenario #1: I plan to buy the pound if the price reaches the entry level around 1.3468 (the green line on the chart), targeting a move toward 1.3485 (the thicker green line on the chart). Around 1.3485, I plan to close my long positions and open short positions, anticipating a 30–35 point pullback from that level. The pound is likely to strengthen today only if the U.S. data come in weaker than expected. Important: Before entering a long position, make sure that the MACD indicator is above the zero line and is just beginning to move higher.
Scenario #2: I also plan to buy the pound if the 1.3457 level is tested twice consecutively while the MACD indicator is in oversold territory. This would limit the pair's downward potential and trigger a bullish market reversal. In this case, a move toward 1.3468 and 1.3485 can be expected.
Sell SignalScenario #1: I plan to sell the pound after the price breaks below the 1.3457 level (the red line on the chart), which should trigger a rapid decline in the pair. The primary downward target for sellers will be 1.3438, where I intend to close my short positions and immediately open long positions, anticipating a 20–25 point rebound from that level. Selling pressure on the pound is likely to return if the U.S. data come in strong. Important: Before entering a short position, make sure that the MACD indicator is below the zero line and is just beginning to move lower.
Scenario #2: I also plan to sell the pound if the 1.3468 level is tested twice consecutively while the MACD indicator is in overbought territory. This would limit the pair's upward potential and trigger a bearish market reversal. In this case, a decline toward 1.3457 and 1.3438 can be expected.
Important: Beginner Forex traders should exercise extreme caution when entering the market. It is generally advisable to stay out of the market ahead of major economic releases to avoid sharp price swings. If you choose to trade during news events, always use stop-loss orders to minimize potential losses. Without stop-loss orders, you risk losing your entire trading capital very quickly, especially if you trade large position sizes without proper risk management.
Finally, remember that successful trading requires a clear trading plan, such as the one outlined above. Making spontaneous trading decisions based solely on current market conditions is generally a losing strategy for intraday traders.