Trade Analysis and Tips for the British Pound

The first test of the 1.2501 level occurred when the MACD indicator had moved significantly above the zero mark, limiting the pair's upward potential. For this reason, I did not buy the pound. The second test of 1.2501 happened shortly after, with the MACD in the overbought area, confirming a correct entry point for Scenario #2 (sell trade). However, the pair did not decline, leading to losses.

Despite mixed services sector data from the UK, which turned out to be less optimistic than expected, the British pound remains resilient and continues to push higher. Investors seem to ignore these negative signals, focusing instead on potential currency strengthening amid softer actions from the Bank of England.

While the services sector report raised some concerns, it failed to weaken the overall positive sentiment in the markets.

Key U.S. economic data will have a significant impact on currency markets, especially for the pound. The ISM Services PMI and Composite PMI for January will reflect the current state of the U.S. economy. If the data falls short of expectations, it could reduce investor optimism and force the Federal Reserve to reconsider its rate hike outlook.

Additionally, the ADP employment report could be a key driver for GBP/USD. Weak employment data could fuel concerns about an economic slowdown, further supporting the British pound.

For intraday strategy, I will focus on Scenario #1 and Scenario #2.

Buy Signal

Scenario #1: Buy GBP/USD at 1.2558 (green line on the chart) with a target of 1.2614. Exit the trade and open sell positions in the opposite direction (expecting a 30-35 point pullback). Only buy after weak U.S. data.

Important: Before buying, ensure that MACD is above the zero mark and starting to rise.

Scenario #2: Buy GBP/USD after two consecutive tests of 1.2517, if MACD is in the oversold zone. This will limit the downward potential and lead to a market reversal upward. Targets: 1.2558 and 1.2614.

Sell Signal

Scenario #1: Sell GBP/USD at 1.2517 (red line on the chart) with a target of 1.2468. Exit the trade and open buy positions in the opposite direction (expecting a 20-25 point retracement). Selling pressure may return at any time, especially after strong U.S. data.

Important: Before selling, ensure that MACD is below the zero mark and starting to decline.

Scenario #2: Sell GBP/USD after two consecutive tests of 1.2558, if MACD is in the overbought zone. This will limit the pair's upward potential and lead to a market reversal downward. Targets: 1.2517 and 1.2468.

Chart Key:

• Thin green line – Entry price for buying the instrument.
• Thick green line – Projected take-profit level (higher growth unlikely beyond this point).
• Thin red line – Entry price for selling the instrument.
• Thick red line – Projected take-profit level (further decline unlikely beyond this point).
• MACD Indicator – Monitor overbought/oversold conditions before entering trades.

Important Notes for Beginner Forex Traders:

Be cautious when entering the market, especially before major economic reports. It is best to stay out of the market before high-impact fundamental data to avoid sudden price swings. If trading during news releases, always set stop-loss orders to minimize losses. Without stop-loss orders, you can quickly lose your entire deposit, particularly if trading with high leverage.

Successful trading requires a clear strategy, like the one outlined above. Avoid spontaneous trading decisions, as trading based on short-term market fluctuations is a losing strategy for intraday traders.