Trade analysis and advice on trading the British pound

The test of the 1.3104 level occurred when the MACD indicator had already moved significantly below the zero line, which limited the pound's downward potential. For this reason, I did not sell the pound and stayed out of the market.

The euphoria that followed yesterday's Bank of England decision to keep interest rates unchanged—while hinting at possible policy easing later this year—proved short-lived. Despite the Bank's efforts to maintain stability, the key factor driving the pound right now remains political uncertainty.

The incomplete budget process poses significant risks for the economy, as the lack of a clear fiscal strategy undermines investor confidence. The upcoming battle over budget approval promises to be intense. Disagreements between political forces over spending priorities and deficit-reduction measures could delay the process and deepen uncertainty. In these conditions, traders tend to avoid risky assets like the British pound, which explains its current weakness.

During the U.S. session, pressure on the pound may increase, as we await solid data from the University of Michigan Consumer Sentiment Index and its accompanying inflation expectations report. There will also be a speech by FOMC member Philip N. Jefferson.

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

Buy Signal

Scenario #1: I plan to buy the pound today at around 1.3111 (green line on the chart), targeting 1.3151 (thicker green line on the chart). Around 1.3151, I plan to close my long positions and open shorts in the opposite direction, expecting a 30–35 point pullback. A rise in the pound today is only likely if U.S. data turns out very weak.Important! Before buying, make sure that the MACD indicator is above the zero line and just starting to rise from it.

Scenario #2: I also plan to buy the pound in case of two consecutive tests of the 1.3083 level while the MACD indicator is in the oversold zone. This would limit the pair's downward potential and trigger a market reversal upward. A rise toward 1.3111 and 1.3151 can then be expected.

Sell Signal

Scenario #1: I plan to sell the pound after it breaks below 1.3083 (red line on the chart), which should lead to a quick decline. The key target for sellers will be 1.3045, where I plan to close short positions and open longs in the opposite direction (expecting a 20–25 point rebound from that level). The pound could weaken further after strong U.S. data.Important! Before selling, make sure that the MACD indicator is below the zero line and just starting to move down from it.

Scenario #2: I also plan to sell the pound if the 1.3111 level is tested twice in a row while the MACD is in the overbought zone. This will limit the pair's upward potential and lead to a downward reversal. A decline toward 1.3083 and 1.3045 can then be expected.

Chart Explanation

• Thin green line – entry price for buying the trading instrument
• Thick green line – suggested Take Profit level or area to manually lock in profit, as further growth above this level is unlikely
• Thin red line – entry price for selling the trading instrument
• Thick red line – suggested Take Profit level or area to manually lock in profit, as further decline below this level is unlikely
• MACD indicator – when entering the market, it's important to consider overbought and oversold zones

Important Note

Beginner Forex traders should be extremely cautious when deciding when to enter the market. Before major fundamental reports are released, it's best to stay out of the market to avoid sudden price swings.

If you choose to trade during news releases, always set stop-loss orders to minimize losses. Without stop-losses, you can quickly lose your entire deposit — especially if you neglect money management and trade with large volumes.

And remember: for successful trading, you need a clear trading plan, such as the one presented above. Making spontaneous trading decisions based on the current market situation is an inherently losing strategy for intraday traders.