Trade Review and Trading Tips for the British Pound

The test of the 1.3727 price level occurred at a moment when the MACD indicator had already moved significantly upward from the zero line, which limited the pair's upward potential. For this reason, I did not buy the pound. The second test of this price led to the implementation of Sell Scenario No. 2, resulting in the pair falling by more than 20 points.

As the data showed, the UK services PMI rose to 54.0 points in January from 51.4 in December; however, the figure fell short of economists' forecasts, prompting traders to sell the pound. This news undoubtedly added fuel to discussions about the state of the British economy. On the one hand, the rise in the PMI indicates continued expansion in the services sector, a key component of the country's GDP. This gives some hope that the economy will avoid recession. On the other hand, the disappointment caused by the miss versus forecasts highlights the fragility and instability of the recovery.

Next, the U.S. labor market will be in focus. Although ADP data do not always closely correlate with the official statistics from the Department of Labor, they still provide insight into trends in the private sector. If the number of new jobs turns out to be significantly higher than expected, this could trigger a strengthening of the dollar and a decline in interest in risk assets, as it would heighten concerns about a more aggressive Fed policy. On the other hand, weak figures could support markets by signaling a slowdown in economic growth and a possible easing of monetary policy in the future.

The ISM services PMI, in turn, is an important indicator of the health of the largest segment of the U.S. economy. A reading above 50 points indicates expansion, while a reading below 50 indicates contraction. An increase in the index would lead to a stronger dollar and a weaker pound.

As for the intraday strategy, I will rely more on the implementation of Scenarios No. 1 and No. 2.

Buy Signal

Scenario No. 1: Today, I plan to buy the pound upon reaching the entry point around 1.3716 (green line on the chart), with a growth target at 1.3748 (the thicker green line on the chart). Around 1.3748, I will exit long positions and open sell positions in the opposite direction (aiming for a move of 30–35 points in the opposite direction from this level). Pound growth today can be expected after weak U.S. data.Important! Before buying, make sure that the MACD indicator is above the zero line and is just beginning to rise from it.

Scenario No. 2: I also plan to buy the pound today in the event of two consecutive tests of the 1.3695 price level while the MACD indicator is in the oversold area. This will limit the pair's downward potential and lead to a reversal of the market upward. Growth toward the opposite levels of 1.3716 and 1.3748 can be expected.

Sell Signal

Scenario No. 1: I plan to sell the pound today after an update of the 1.3695 level (red line on the chart), which will lead to a rapid decline in the pair. The key target for sellers will be the 1.3668 level, where I will exit sell positions and immediately open buy positions in the opposite direction (aiming for a move of 20–25 points in the opposite direction from this level). Pressure on the pound will return today on strong data.Important! Before selling, make sure that the MACD indicator is below the zero line and is just beginning to decline from it.

Scenario No. 2: I also plan to sell the pound today in the event of two consecutive tests of the 1.3716 price level while the MACD indicator is in the overbought area. This will limit the pair's upward potential and lead to a reversal of the market downward. A decline toward the opposite levels of 1.3695 and 1.3668 can be expected.

What's on the Chart

• Thin green line – entry price at which the trading instrument can be bought;
• Thick green line – estimated price where Take Profit orders can be placed or profits can be taken manually, as further growth above this level is unlikely;
• Thin red line – entry price at which the trading instrument can be sold;
• Thick red line – estimated price where 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 rely on overbought and oversold zones.

Important. Beginner traders in the Forex market need to be very cautious when making decisions about entering the market. Before the release of important fundamental reports, it is best to stay out of the market to avoid sharp price fluctuations. If you decide to trade during news releases, always place stop orders to minimize losses. Without stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes.

And remember that successful trading requires a clear trading plan, like the one presented above. Spontaneous trading decisions based on the current market situation are an inherently losing strategy for an intraday trader.