Trade analysis and trading tips for the British pound
The test of the 1.3466 price level occurred when the MACD indicator had just started moving upward from the zero line, confirming a valid entry point for buying the pound. As a result, the pair rose toward the target level of 1.3495.
The British pound maintained its upward movement against the US dollar following the results of the US elections, in which the Democrats came out on top, despite the final services sector data coming in slightly below expectations. The October PMI stood at 52.8, compared with economists' expectations and the preliminary estimate of 53.1. However, the reading was higher than September's 52.1 and marked the highest level since February, indicating that the overall trend remains upward.
Although the pound is entering the second half of the day amid a weaker dollar, US economic data could change the situation. The US Services PMI and Composite PMI will be released this evening, with expected readings of 57.9 and 57.6, respectively, matching the preliminary estimates. September's figures were higher, at 58.8 and 58.4, so the anticipated slight slowdown has already been priced in.
The ISM Services PMI will be released next, with a forecast of 54.9, unchanged from September's reading and slightly below August's 55.4. Within the report, employment will be an important component to watch, as it rose above the 50-point threshold in September for the first time since June. New orders, which remained at a high level, will also be worth monitoring.
The September trade balance will also be published, with the deficit expected to reach $107.9 billion, compared with $105.6 billion in August. A wider trade deficit typically puts slight downward pressure on the dollar.
If the ISM and PMI figures exceed expectations, particularly the employment component, demand for the dollar could return, and GBP/USD may give back some of its recent gains. I expect the pound to remain sensitive to US economic data, with an above-forecast ISM reading posing the main risk to buyers.
As for the intraday strategy, I will focus primarily on implementing Scenarios #1 and #2.
Buy Signal
Scenario #1: Today, I plan to buy the pound when the price reaches the entry level of around 1.3484 (the green line on the chart), targeting a rise to 1.3539 (the thicker green line on the chart). Around 1.3539, I plan to close my long positions and open short positions, targeting a reverse move of 30–35 points from that level. The pound could rise today if US economic data comes in weaker than expected.
Important! Before buying, make sure that the MACD indicator is above the zero line and has just started moving upward from it.
Scenario #2: I also plan to buy the pound today if the price tests the 1.3464 level twice consecutively while the MACD indicator is in the oversold area. This would limit the pair's downward potential and trigger an upward market reversal. The pair could then rise toward the opposite levels of 1.3484 and 1.3539.
Sell Signal
Scenario #1: Today, I plan to sell the pound after the price breaks below the 1.3464 level (the red line on the chart), which could trigger a rapid decline in the pair. The sellers' main target will be 1.3429, where I plan to close my short positions and immediately open long positions, targeting a reverse move of 20–25 points from that level. Strong selling pressure on the pound could return if US economic data comes in stronger than expected.
Important! Before selling, make sure that the MACD indicator is below the zero line and has just started moving downward from it.
Scenario #2: I also plan to sell the pound today if the price tests the 1.3484 level twice consecutively while the MACD indicator is in the overbought area. This would limit the pair's upward potential and trigger a downward market reversal. The pair could then decline toward the opposite levels of 1.3464 and 1.3429.
What the Chart Shows
- Thin green line – the entry price at which the trading instrument can be bought.
- Thick green line – the projected price level at which Take Profit can be set or profits can be closed manually, as further gains above this level are considered unlikely.
- Thin red line – the entry price at which the trading instrument can be sold.
- Thick red line – the projected price level at which Take Profit can be set or profits can be closed manually, as further declines below this level are considered unlikely.
- MACD indicator – when entering the market, it is important to consider the overbought and oversold zones.
Important: Beginner Forex traders should exercise extreme caution when making market entry decisions. It is best to stay out of the market ahead of major fundamental economic releases to avoid exposure to sharp exchange rate fluctuations. If you decide to trade during news releases, always use stop-loss orders to minimize potential losses. Without stop-loss orders, you can lose your entire trading deposit very quickly, especially if you do not use proper money management and trade with large position sizes.
Remember that successful trading requires a clear trading plan, such as the one presented above. Making spontaneous trading decisions based on current market conditions is a losing strategy for an intraday trader from the outset.