Hourly chart of the GBP/USD pair
The GBP/USD pair continued to move down for some time on Tuesday, January 26, and it only turned up just before this movement had ended. A buy signal was generated from the MACD indicator during the evening, it is circled by the first red circle. Unfortunately, this signal turned out to be false and those who opened long positions on it received a loss of about 22 points. However, the second buy signal, which was created in the daytime, turned out to be strong and real. According to it, novice traders also had to enter the market and stay in it as long as the MACD indicator was directed to the upside (since there was no rebound from any of the target levels). Thus, at the moment, the profit on this signal is about 75 points, which covers the losses on the first trade and leaves newcomers with a total profit of about 45-50 points, which is an excellent result, given the specifics of the current trading. In general, the upward trend continued on Tuesday, and the price not only remained above the trend line, but also crossed the smaller downward trend line and returned to its 2.5-year highs. So now novice traders need to wait for new buy signals.
Several relatively important macroeconomic reports were released in the UK on Tuesday. Take note that all three published reports turned out to be better than the forecasted values, thus, the strengthening of the pound during the day is absolutely logical and reasonable. However, it is quite possible that the British currency would have continued rising even without these reports, as we have said more than once. The UK unemployment rate rose, but grew less-than-expected to 5.0%. Average wages increased by 3.6% against the forecast of +2.9%, and the number of applications for unemployment benefits increased by 7,000 against the forecast of +45,000.
The results of the Federal Reserve meeting will be summed up late in the evening on Wednesday, January 27. We can expect something new considering that this is the first Fed meeting in 2021, as well as the first speech by Jerome Powell this year. However, in any case, the pound/dollar pair will be trading on technical factors until the evening, since no more events are planned for tomorrow. You can leave the market before the very beginning of summing up the results of the Fed meeting, and until that time - trade completely freely.
Possible scenarios on January 27:
1) Buy orders remain relevant as the price continues to be above the trend line. Therefore, you are advised to monitor the formation of buy signals. First, the pair should slightly correct to the downside, after which the MACD indicator should turn up and in this case, you should open long positions while aiming for 1.3713 and 1.3755.
2) Selling is not recommended right now, as the upward trend is maintained for the GBP/USD pair. You can open short positions when the price finally settles below the rising trend line. Targets in this case can be located near the 1.3563 level.
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.
