FX.co ★ GBP/USD: Trading Tips for Beginner Traders – October 6

Analysis of Trades and Trading Tips for the British Pound

The test of the 1.3214 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 1.3234.

The pound rose following the construction data, and the first point to understand is what exactly prompted the market to buy the currency. The PMI came in at 46.1, compared with 44.3 a month earlier and a forecast of 45. This means only that the contraction slowed to its mildest pace in eight months. Buyers saw an improvement in the trend, which was sufficient to recover part of the previous decline. At the same time, house prices are rising across the country, but construction companies are not responding quickly to demand because decisions on major projects are being postponed and costs have increased significantly. For the Bank of England, this is another argument in the debate between the two policy positions. One side sees a cooling economy, while the other sees inflationary pressure, and today's report provides support for both assessments.

The pound will have little influence over the evening session, which will be determined by U.S. events. Weekly ADP data, the RCM/TIPP optimism index, and speeches by Bowman and Schmid are scheduled. At first glance, these events do not directly concern the British currency, but days like this show how strongly GBP/USD depends on sentiment surrounding the U.S. dollar. Friday's U.S. employment report was weak, showing 29,000 new jobs, with downward revisions totaling 60,000, and the market is now looking for confirmation from other sources. As for the policymakers, Bowman was previously viewed as a cautious voice, while Schmid argued that monetary policy was not restricting the economy. The market will soon see what their positions will be today.

As for the intraday strategy, greater emphasis will be placed on the implementation of Scenarios No. 1 and No. 2.

Buy Signal

Scenario No. 1: Today, the pound can be bought when the entry price reaches around 1.3247 (the green line on the chart), with the target of rising to 1.3267 (the thicker green line on the chart). Around 1.3267, the long position can be closed and a short position opened, targeting a 30–35-point move in the opposite direction from the level. A rise in the pound today can be expected only if U.S. data are very weak. Important! Before buying, make sure that the MACD indicator is above the zero line and has just started rising from it.

Scenario No. 2: The pound can also be bought today if the price tests 1.3233 twice consecutively while the MACD indicator is in the oversold zone. This will limit the pair's downside potential and may result in a reversal to the upside. A rise toward the opposite levels of 1.3247 and 1.3267 can be expected.

Sell Signal

Scenario No. 1: Today, the pound can be sold after the 1.3233 level is broken (the red line on the chart), which would result in a rapid decline in the pair. The key target for sellers will be 1.3212, where the short position can be closed and a long position opened immediately, targeting a 20–25-point move in the opposite direction from the level. Strong downward pressure on the pound will return if the economic data are strong. Important! Before selling, make sure that the MACD indicator is below the zero line and has just started declining from it.

Scenario No. 2: The pound can also be sold today if the price tests 1.3247 twice consecutively while the MACD indicator is in the overbought zone. This will limit the pair's upward potential and may result in a reversal to the downside. A decline toward the opposite levels of 1.3233 and 1.3212 can be expected.

What Is Shown on the Chart:

• Thin green line – the entry price at which the trading instrument can be bought;
• Thick green line – the estimated price at which Take Profit orders can be placed or profits can be closed manually, as further growth above this level is unlikely;
• Thin red line – the entry price at which the trading instrument can be sold;
• Thick red line – the estimated price at which Take Profit orders can be placed or profits can be closed manually, as further decline below this level is 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. Before the release of important fundamental reports, it is preferable to remain out of the market to avoid exposure to sharp exchange-rate fluctuations. If you decide to trade during news releases, always place stop orders to minimize losses. Without stop orders, you can lose the entire deposit very quickly, especially if you do not use proper money management and trade large volumes.

Remember that successful trading requires a clear trading plan, such as the one presented above. Making spontaneous trading decisions based on the current market situation is inherently an unsuccessful strategy for an intraday trader.