Trade Analysis and Trading Tips for the British Pound

The test of the 1.3530 price level occurred when the MACD indicator was just beginning to move downward from the zero line, confirming that it was the right entry point for selling the pound. As a result, the pair declined by only 10 points.

Today, Andrew Bailey delivered a speech on central bank independence, but the pound paid no attention to it, which is telling. The Governor of the Bank of England began with a quote from Alexander Hamilton dating back to 1780, referred to Douglas North's definition of institutions as the rules of the game in society, and explained why independence emerged in the first place. He also addressed the concerns of critics who ask why an unelected institution has so much power. There was no reaction in the currency market for a simple reason: there is simply no conflict over the central bank's independence in the UK, while traders are waiting for U.S. labor-market data rather than philosophical discussions.

As for the NFP report, economists expect employment to increase by around 50,000–60,000, with unemployment at approximately 4.1%, but the entire week of U.S. labor-market data has already been disappointing. Let me remind you that ADP showed only 38,000 new jobs, the lowest figure since January, while the JOLTS report pointed to a decline in hiring, so confidence in the strength of employment has weakened considerably. Under these conditions, the pound becomes dependent on external factors. In my view, data in line with forecasts would not rule out a Fed rate hike in September, in which case the dollar would retain its advantage and pressure on GBP/USD could return. However, another significant disappointment in employment could put serious pressure on the central bank and push it toward a pause, which would weaken the dollar and support the British currency.

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

Buy Signal

Scenario #1: I plan to buy the pound today when the entry point is reached around 1.3534 (the green line on the chart), with a target of 1.3561 (the thicker green line on the chart). Around 1.3561, I will exit the long position and open a short position in the opposite direction, targeting a move of 30–35 points in the opposite direction from the level. A rise in the pound today can be expected only after weak U.S. data. Important! Before buying, make sure that the MACD indicator is above the zero line and has only just started rising from it.

Scenario #2: I also plan to buy the pound today if the price tests 1.3518 twice consecutively while the MACD indicator is in the oversold area. This will limit the pair's downward potential and lead to a reversal higher. A rise toward the opposite levels of 1.3534 and 1.3561 can be expected.

Sell Signal

Scenario #1: I plan to sell the pound today after the 1.3518 level is broken (the red line on the chart), which should lead to a rapid decline in the pair. The key target for sellers will be 1.3494, where I will exit the short position and immediately open a long position in the opposite direction, targeting a move of 20–25 points in the opposite direction from the level. Strong pressure on the pound will return if the data are strong. Important! Before selling, make sure that the MACD indicator is below the zero line and has only just started declining from it.

Scenario #2: I also plan to sell the pound today if the price tests 1.3534 twice consecutively while the MACD indicator is in the overbought area. This will limit the pair's upward potential and lead to a reversal lower. A decline toward the opposite levels of 1.3518 and 1.3494 can be expected.

What the chart shows:

• 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 taken 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 taken 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 be very cautious when making market-entry decisions. Before the release of important fundamental reports, it is best to stay out of the market to avoid being caught in sharp exchange-rate fluctuations. If you decide to trade during a news release, always place stop orders to minimize losses. Without stop orders, you can lose your entire deposit very quickly, especially if you do not use proper money management and instead trade large volumes.

And 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 a losing strategy for an intraday trader from the outset.