Analysis of Trades and Trading Tips for the British Pound
The test of the 1.2947 level occurred when the MACD indicator had already moved significantly above the zero mark, which limited the pair's upside potential. For this reason, I did not buy the pound.
By the end of Friday, the pound continued its correction. However, every decent downward move is quickly bought out, indicating that bullish potential remains, even though short-term upside prospects are uncertain and will largely depend on today's UK data. Investors remain cautious about the outlook for the British economy, given rising inflation and mixed signals from the Bank of England regarding future monetary policy.
Today's macroeconomic data — particularly the manufacturing PMI, services PMI, and the composite PMI for the UK for March — will play an important role.
Of particular interest is the manufacturing PMI, which provides insight into the state of the industrial sector amid high energy prices. This figure reflects business sentiment and expectations regarding future orders and production volumes. However, even more significant is the services PMI, which captures dynamics in the sector that constitutes a large portion of the UK economy. A rise or fall in this index can indicate shifts in consumer demand and investment activity, directly impacting the country's overall economic health and the British pound.
The composite PMI, which combines manufacturing and services data, will offer a more comprehensive view of the UK economy. Weak economic data will likely result in a further correction in the pound's value.
For intraday strategy, I will focus primarily on implementing Scenarios #1 and #2.
Buy Signal
Scenario #1: Today, I plan to buy the pound upon reaching the entry point around 1.2935 (green line on the chart), targeting a rise to 1.2985 (thicker green line on the chart). Around 1.2985, I plan to exit the long position and open a sell position in the opposite direction, aiming for a 30–35 pip pullback. A bullish outlook for the pound is only reasonable if the data is strong. Important! Before buying, ensure the MACD indicator is above the zero line and starting to rise.
Scenario #2: I also plan to buy the pound today if there are two consecutive tests of the 1.2907 level while the MACD indicator is in the oversold zone. This would limit the downside potential and trigger a reversal to the upside. A rally toward the opposite levels of 1.2935 and 1.2985 can be expected.
Sell Signal
Scenario #1: I plan to sell the pound after a break below the 1.2907 level (red line on the chart), which could lead to a quick decline. The key target for sellers will be 1.2865, where I intend to exit the short position and immediately open a buy position in the opposite direction, expecting a 20–25 pip rebound. It's best to sell the pound from as high a level as possible. Important! Before selling, make sure the MACD indicator is below the zero line and just starting to fall from it.
Scenario #2: I also plan to sell the pound today if there are two consecutive tests of the 1.2935 level while the MACD indicator is in the overbought zone. This would limit the pair's upside potential and trigger a reversal to the downside. A decline toward the opposite levels of 1.2907 and 1.2865 can be expected.
What's on the Chart:
- The thin green line represents the entry price where the trading instrument can be bought.
- The thick green line indicates the expected price level where a Take Profit order can be placed, or profits can be manually secured, as further price growth above this level is unlikely.
- The thin red line represents the entry price where the trading instrument can be sold.
- The thick red line indicates the expected price level where a Take Profit order can be placed, or profits can be manually secured, as further price decline below this level is unlikely.
- The MACD indicator should be used to assess overbought and oversold zones when entering the market.
Important Notes:
- Beginner Forex traders should exercise extreme caution when making market entry decisions. It is advisable to stay out of the market before the release of important fundamental reports to avoid exposure to sharp price fluctuations. If you choose to trade during news releases, always use stop-loss orders to minimize potential losses. Trading without stop-loss orders can quickly wipe out your entire deposit, especially if you neglect money management principles and trade with high volumes.
- Remember, successful trading requires a well-defined trading plan, similar to the one outlined above. Making impulsive trading decisions based on the current market situation is a losing strategy for intraday traders.
