Trade Analysis and Tips for the British Pound

The test of the 1.2215 price level in the first half of the day coincided with the MACD indicator just starting to move upward from the zero line, confirming a valid entry point for buying the pound. However, the pair only rose by 10 points before demand for the pound subsided.

Data showing that UK inflation was lower than economists' forecasts provided a positive signal for pound buyers. The inflation rate fell below expectations, perceived as a sign of economic stabilization and a possible easing of monetary policy. The data included the following: 0.3% month-over-month (vs. expected 0.4%), 2.5% year-over-year (vs. expected 2.6%), and a core inflation rate of 3.2% year-over-year. Following the inflation report, futures markets now price a 73% probability of a Bank of England rate cut in February, up from 62% previously, and fully expect two rate cuts this year. However, inflation data is just one of many factors affecting currency exchange rates. Other macroeconomic indicators, such as unemployment rates and GDP growth, must be considered to form a comprehensive view of the economy.

In the second half of the day, similar reports will be released for the U.S. Data on the Consumer Price Index (CPI) and the core CPI (excluding food and energy prices) will provide insights into inflationary pressures in the U.S. Rising inflation would support the dollar, while easing price pressures could favor a bullish trend for the pound.

For intraday strategy, I will focus on implementing Scenario #1, even without MACD signals, as I anticipate strong directional movement.

Buy Signal

Scenario #1: Plan to buy the pound at 1.2242 (green line on the chart) with a target of 1.2305 (thicker green line on the chart). At 1.2305, I plan to exit purchases and open short positions, expecting a reversal of 30-35 points. A bullish move for the pound is only likely if U.S. data disappoints.Important! Before buying, ensure the MACD indicator is above the zero line and just starting to rise.

Scenario #2: I also plan to buy the pound if there are two consecutive tests of 1.2210, and the MACD indicator is in oversold territory. This would limit the pair's downward potential and trigger an upward reversal. Expected targets are 1.2242 and 1.2305.

Sell Signal

Scenario #1: Plan to sell the pound after it breaks below 1.2210 (red line on the chart), leading to a rapid decline in the pair. The key target for sellers will be 1.2149, where I will exit sales and immediately open buy positions for a reversal of 20-25 points. Sellers may act aggressively if strong U.S. data supports the dollar.Important! Before selling, ensure the MACD indicator is below the zero line and just starting to decline.

Scenario #2: I also plan to sell the pound if there are two consecutive tests of 1.2242, and the MACD indicator is in overbought territory. This would limit the pair's upward potential and trigger a downward reversal. Expected targets are 1.2210 and 1.2149.

On the Chart:

• Thin green line: Entry price for buying the instrument.
• Thick green line: Estimated level for setting Take Profit or manually locking profits, as further growth above this level is unlikely.
• Thin red line: Entry price for selling the instrument.
• Thick red line: Estimated level for setting Take Profit or manually locking profits, as further declines below this level are unlikely.
• MACD Indicator: Use overbought and oversold zones for market entry guidance.

Important Notes:

Beginner traders on the Forex market must exercise extreme caution when making entry decisions. It's best to stay out of the market before the release of critical fundamental reports to avoid sudden price fluctuations. If you decide to trade during news events, always set stop-loss orders to minimize losses. Without stop-losses, you risk losing your entire deposit quickly, especially if trading large volumes without proper money management.

Remember, successful trading requires a clear trading plan, like the one outlined above. Spontaneous trading decisions based on current market conditions are inherently a losing strategy for intraday traders.