FX.co ★ Analysis and trading tips for GBP/USD on May 27

Analysis of transactions in the GBP / USD pair

GBP/USD reaching 1.2553 prompted a sell signal in the market, however, having the MACD line far from zero limited the downside potential of the pair. The second test was more successful as the buy signal led to more than 40-pip increase in the pair.

Some time after, a buy signal emerged when the pair hit 1.2575. It resulted in a more than 45 pips increase in price, towards 1.2610, where short positions led to a more than 50 pips decrease. Sales at 1.2553 will provoke another 60-pip decline.

The absence of statistics in the UK yesterday helped pound beat off the lows and maintain an upward potential. Additionally, weak data on US GDP for the first quarter prevented the quote from breaking below 1.2553, although sellers were trying to crack down on the level until the end of the day. This morning, pound reached new monthly highs as there are no UK statistics scheduled to be released. In the afternoon, data on income and spending in the US will be published, which could lead to a rise in dollar provided that the figures show growth. There will also be data on foreign trade balance, consumer sentiment and inflation expectations, as well as a speech from FOMC member James Bullard, but these may be ignored by the market.

For long positions:

Buy pound when the quote reaches 1.2656 (green line on the chart) and take profit at the price of 1.2705 (thicker green line on the chart). There is a chance for a rally today because there are no statistics scheduled to be released. However, note that when buying, make sure that the MACD line is above zero, or is starting to rise from it. It is also possible to buy at 1.2618, but the MACD line should be in the oversold area as only by that will the market reverse to 1.2656 and 1.2705.

For short positions:

Sell pound when the quote reaches 1.2618 (red line on the chart) and take profit at the price of 1.2559. Pressure is likely to return if there is no bullish activity at 1.2618. However, note that when selling, make sure that the MACD line is below zero, or is starting to move down from it. Pound can also be sold at 1.2656, but the MACD line should be in the overbought area, as only by that will the market reverse to 1.2618 and 1.2559.

What's on the chart:

The thin green line is the key level at which you can place long positions in the GBP/USD pair.

The thick green line is the target price, since the quote is unlikely to move above this level.

The thin red line is the level at which you can place short positions in the GBP/USD pair.

The thick red line is the target price, since the quote is unlikely to move below this level.

MACD line - when entering the market, it is important to be guided by the overbought and oversold zones.

Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes.

And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decisions based on the current market situation is an inherently losing strategy for an intraday trader.