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01.02.2023 07:37 AM
Analysis and trading tips for GBP/USD on February 1

Analysis of transactions and tips for trading GBP/USD

Pound tested 1.2330 just when the MACD line was starting to move below zero, which was a pretty good reason to sell. However, the movement was only 25 pips. No other signals appeared for the rest of the day.

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Data on M4 money supply and approved mortgage applications did not affect pound much. Meanwhile, the weak US consumer confidence report weakened demand for dollar, prompting a rise in GBP/USD during the US session.

The UK manufacturing activity index is expected today, but it is unlikely to result in a major market change even if the indicator is slightly down. This is because much more important event is the Fed meeting in the afternoon, where interest rates could be raised by 0.25%. That scenario will weaken dollar demand and cause a sharp rise in euro, especially since other data relating to employment and manufacturing activity will be of little interest. Dovish stance of the Fed will also return risk appetite.

For long positions:

Buy pound when the quote reaches 1.2329 (green line on the chart) and take profit at the price of 1.2358 (thicker green line on the chart). Growth will be possible only if the Fed takes a dovish stance on monetary policy. However, make sure that when buying, the MACD line is above zero or is starting to rise from it. Pound can be bought at 1.2303, but the MACD line should be in the oversold area as only by that will the market reverse to 1.2329 and 1.2358.

For short positions:

Sell pound when the quote reaches 1.2303 (red line on the chart) and take profit at the price of 1.2271. Pressure will return on very hawkish stance of the Fed and weak position of the Bank of England regarding monetary policy. However, when selling, make sure that the MACD line is below zero or is starting to move down from it. Pound can also be sold at 1.2329, but the MACD line should be in the overbought area as only by that will the market reverse to 1.2303 and 1.2271.

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What's on the chart:

The thin green line is the key level at which you can place long positions in the GBP/USD pair.

The thick green line is the target price, since the quote is unlikely to move above this level.

The thin red line is the level at which you can place short positions in the GBP/USD pair.

The thick red line is the target price, since the quote is unlikely to move below this level.

MACD line - when entering the market, it is important to be guided by the overbought and oversold zones.

Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing 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 for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.

Jakub Novak,
Analytical expert of InstaForex
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