Trade Analysis and Tips for Trading the British Pound

The test of 1.3420 occurred when the MACD indicator had already moved significantly below the zero line. Therefore, selling the pound was considered too risky, and the entire move in the pair was missed.

The dollar is currently receiving strong support, and today's employment report could provide a new bullish impulse. On the one hand, the Democrats' victory in the elections and declining US Treasury yields are supporting the US currency. On the other hand, the Fed maintains a hawkish stance. Beth Hammack stated the previous day that monetary policy would need to shift toward a restrictive stance, while the market is pricing in a rate hike in December and another one in March. The labor market will be the decisive factor. If nonfarm payroll growth comes in close to or above the forecast of 65,000, while average hourly earnings increase by 0.3%, the Fed will have little reason to pause its tightening cycle. Treasury yields will rise, and the dollar will recover its previous losses. In this case, risk-sensitive assets will continue to decline. Conversely, a weak report would support expectations of an economic slowdown and give the pound an opportunity to recover. The University of Michigan Consumer Sentiment Index will provide an additional indication of economic conditions. Given the current balance of factors, the dollar is likely to remain in a stronger position, as there are currently few indications that the economic data will be weak.

As for the intraday strategy, the focus will be primarily on the implementation of Scenarios #1 and #2.

Buy Signal

Scenario #1: The pound can be bought today when the price reaches the entry level around 1.3395 (the green line on the chart), with a target of reaching 1.3423 (the thicker green line on the chart). Around 1.3423, the long position will be closed and a short position will be opened, targeting a move of 30–35 points in the opposite direction from that level. The pound could rise today if US economic data is weaker than expected. Important! Before buying, make sure that the MACD indicator is above the zero line and has just started rising from it.

Scenario #2: The pound can also be bought today if the price tests 1.3373 twice consecutively while the MACD indicator is in the oversold area. This will limit the pair's downward potential and trigger an upward market reversal. The pair can be expected to rise toward the opposite levels of 1.3395 and 1.3373.

Sell Signal

Scenario #1: The pound can be sold today after the price breaks below 1.3373 (the red line on the chart), which could lead to a rapid decline in the pair. The sellers' main target will be 1.3348, where the short position will be closed and a long position will be opened immediately, targeting a move of 20–25 points in the opposite direction from that level. Strong selling pressure on the pound will return if US economic data is strong. Important! Before selling, make sure that the MACD indicator is below the zero line and has just started declining from it.

Scenario #2: The pound can also be sold today if the price tests 1.3395 twice consecutively while the MACD indicator is in the overbought area. This will limit the pair's upward potential and trigger a downward market reversal. The pair can be expected to decline toward the opposite levels of 1.3373 and 1.3348.

What the Chart Shows:

• Thin green line – the entry price at which the trading instrument can be bought;
• Thick green line – the estimated price level at which Take Profit orders can be placed or profits can be closed manually, as further gains above this level are unlikely;
• Thin red line – the entry price at which the trading instrument can be sold;
• Thick red line – the estimated price level at which Take Profit orders can be placed or profits can be closed manually, as further declines below this level are unlikely;
• MACD indicator. When entering the market, it is important to consider the overbought and oversold areas.

Important. Beginner Forex traders should exercise extreme caution when making entry decisions. Before the release of important fundamental reports, it is generally best to stay out of the market to avoid exposure to sharp exchange rate fluctuations. If trading during news releases, always place stop-loss orders to minimize potential losses. Without stop-loss orders, the entire trading account can be lost very quickly, especially when trading large volumes without proper money management.

It is also important to 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 inherently a losing strategy for intraday traders.