Hourly chart of the GBP/USD pair
The upward movement resumed for the GBP/USD pair last night. Take note that yesterday the pair's quotes reached the 1.3700 level for the fourth time and rebounded off it again. However, this time the pullback to the downside was only 90 points (previously 250 and 180). Thus, there is every reason to believe that there will be a fifth attempt to surpass this level. In addition, the MACD indicator generated a buy signal last night. A downward correction by 90 points was enough for the indicator to be sufficiently discharged, so the buy signal turned out to be strong enough. Novice traders had every right to open long positions on it. Those who did so are currently in profit by around 15 points. However, the buy signal has not yet been canceled. Accordingly, it is too early to close buy orders. In general, the upward trend is maintained for the pound/dollar pair since the quotes left the downward channel. There is currently no trend line or channel to support the upward movement. The key value is still at the 1.3700 level. If the price overcomes it, the upward movement will continue.
The macroeconomic calendar for Wednesday included a speech from the head of the Bank of England, Andrew Bailey. However, Bailey did not mention anything important. He only noted that GDP in September was about 10% lower than before the pandemic, and also shared his opinion that the UK economy will face a bright recovery. It is unclear what he meant by the word "bright". So far, we can conclude that there will be no recovery in the first quarter of 2021. Therefore, perhaps, "a bright recovery, but much later." Moreover, British Finance Minister Rishi Sunak said that "the economy will contract even more before starting to recover." There are no major events planned in the UK to date, so everyone is focused on the reports on US unemployment claims. Although, given how persistently the pound is rising, it hardly needs support from weak (presumably) reports from America.
Possible scenarios on January 21:
1) Long positions became relevant when the pair settled above the descending channel. A new strong buy signal was formed last night. Therefore, novice traders should already be in long positions while aiming for 1.3700 and 1.3760. The upward movement may stop again around the 1.3700 level, but we are inclined to believe that it will still surpass it during the fifth attempt. Thus, there is no reason to close longs at the moment.
2) Selling has lost its relevance since the price left the upward channel. There is no evidence that the upward trend is over. So far, there is no reason to open short positions. In the near future, a rising channel may appear, and you can finally open new shorts when the price has settled below it.
On the chart:
Support and Resistance Levels are the Levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Red lines are the channels or trend lines that display the current trend and show in which direction it is better to trade now.
Up/down arrows show where you should sell or buy after reaching or breaking through particular levels.
The MACD indicator consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend lines (channels and trend lines).
Important announcements and economic reports that you can always find in the news calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommended trading as carefully as possible or exit the market in order to avoid a sharp price reversal.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.
