Analysis and tips on how to trade GBP/USD
The price tested the mark of 1.2083 at the moment the MACD was well above the zero level, which limited the pair's downside potential, especially ahead of pessimistic macro results in the UK. That is why I decided not to sell GBP. In the second half of the day, the quote tested the mark of 1.2117 with the MACD moving up, which limited the upside potential of the sterling. The possibility of an uptrend was confirmed when the pair tested this level again. At the same time, the MACD just started moving up from the zero level. Overall, the price rose by about 30 pips.
The speeches of the Bank of England's officials as well as the Confederation of British Industry's order book balance had no effect on the pound. Today, no macro releases are due in the UK in the first half of the day. Therefore, I do not expect a continuation of the bull market. It is important that you trade cautiously at the highs. In the second half of the day, trading volumes will remain at a low level due to Thanksgiving Day in the US. Thus, it would be wiser not to enter the market during the North American session.
Scenario 1: long positions could be opened today when the quote touches the mark of 1.2124 (green line of the chart) with the target at 1.2168 (thicker green line) where it would be wiser to close buy trades and sell the pound, allowing a correction of 30-35 pips. The pair may show growth in the case of a breakout through the monthly highs. Important! Before buying the instrument, make sure the MACD is above zero and just starts moving up from this level.
Scenario 2: it will become possible to go long when the price reaches 1.2083 with the MACD being in the oversold zone. This would limit the pair's downside potential and lead to a bullish reversal in the market. The quote may go either to 1.2124 or 1.2168.
Scenario 1: today, short positions could be considered when the price tests the mark of 1.2083 (red line on the chart), which may trigger a fall in price. The key target is seen at 1.2044 where it would be wiser to close sell trades and go long, allowing a correction of 20-25 pips. The sterling may feel an increase in case of no bullish activity at the highs. Important! Before selling the instrument, make sure the MACD is below zero and just starts moving down from this level.
Scenario 2: the pound could be sold today when the price approaches 1.2124 and the MACD is in the overbought zone at the same time. This could limit the pair's upside potential and lead to a bearish reversal in the market. The quote may then go either to 1.2083 or 1.2044.
Indicators on charts:
The thin green line indicates a buy entry point.
The thick green line is the estimated price where you should place a take-profit order or close positions manually since the quote is unlikely to grow above this level.
The thin red line indicates a sell entry point.
The thick red line is the estimated price where you should place a take-profit order or close positions manually since the quote is unlikely to fall below this level.
MACD. When entering the market, it is important to pay attention to the overbought and oversold zones.
Remember that novice forex traders should be very careful when deciding to enter the market. Before the release of important fundamentals, you should stay out of the market in order to avoid sharp fluctuations in the rate. If you decide to trade during news releases, make sure always to place a stop-loss order to minimize losses. Without it, you may quickly lose your entire deposit, especially if you do not use money management but trade large volumes.
Remember that in order to succeed in the market, you should have a clear trading plan, like the one I presented above. Spontaneous decisions based on the current state of the market are a losing strategy for an intraday trader.