Analysis of Trades and Trading Tips for the British Pound
The test of the 1.3359 price level in the second half of the day coincided with the MACD indicator having already risen significantly above the zero line, which limited the pair's upside potential. Shortly afterward, a second test of 1.3359 occurred as the MACD began to decline from the overbought zone, triggering Scenario #2 for selling the pound and resulting in a drop of more than 30 pips.
Yesterday's decision by the Federal Reserve to keep interest rates unchanged at 4.50% came as no surprise to the market. This step reflects a conservative approach by the central bank, given the current economic environment characterized by moderate growth and controlled inflation. Fed Chair Jerome Powell's comments focused on the potential risks associated with new trade tariffs and did not add any uncertainty to the monetary policy outlook. Powell emphasized that introducing tariffs could lead to increased inflation due to rising costs of imported goods. Unless the Fed completely understands the consequences, no rate cuts will be considered. This exerted pressure on the pound and boosted the U.S. dollar.
However, today's developments could shift significantly following the Bank of England's decision on its main interest rate, which is expected to be lowered to 4.25%. Key attention will also be given to the BoE's Monetary Policy Report. Markets are closely monitoring any signals about the future path of interest rates. While a rate cut may stimulate economic growth, it could also accelerate inflation, weakening the pound's position against the dollar. The report will provide more insight into the central bank's views on the current state of the economy and inflation forecasts.
For intraday strategy, I will focus primarily on Scenarios #1 and #2.
Buy Scenario
Scenario #1: Today, I plan to buy the pound upon reaching the entry point around 1.3359 (green line on the chart), targeting growth to the 1.3391 level (the thicker green line on the chart). Around 1.3391, I plan to exit the long position and open a short position on a pullback (expecting a move of 30–35 pips in the opposite direction). A strong rally in the pound is more likely if interest rates remain unchanged. 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 1.3330 level while the MACD is in the oversold zone. This would limit the pair's downside potential and trigger an upward market reversal. A rise toward the opposite levels of 1.3359 and 1.3391 can be expected.
Sell Scenario
Scenario #1: I plan to sell the pound today after a breakout below the 1.3330 level (red line on the chart), likely leading to a quick decline in the pair. The key target for sellers will be the 1.3289 level, where I plan to exit the trade and immediately open a long position (expecting a move of 20–25 pips in the opposite direction). Selling the pound is justified after a rate cut and a dovish BoE stance. Important! Before selling, make sure the MACD indicator is below the zero line and starting to decline from it.
Scenario #2: I also plan to sell the pound today in the event of two consecutive tests of the 1.3359 level when the MACD is in the overbought zone. This would cap the pair's upward potential and lead to a reversal downward. A decline toward the opposite levels of 1.3330 and 1.3289 is 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.
