The test of 1.2696 took place at a time when the MACD line started to rise from zero. This provoked a buy signal, leading to a price increase of over 40 pips.
Although the UK house price index did not push pound up in the morning, expectations of a firm stance from the Bank of England prevented a massive sell-off of the pair. Very poor US labor market statistics from the ADP also seemed to offer hope for a softer tone from the committee, but that did not happen. Following the meeting, the Fed kept interest rates unchanged, stating that it will not be lowered soon, let alone in March of this year. This led to dollar demand surging, pulling the pair down to the daily low.
Ahead lies the Bank of England meeting, the monetary policy report, and the speech of Bank of England Governor Andrew Bailey. Obviously, in the face of rising inflation, the regulator will unlikely ease its policy, most likely adopting a similar position to the Federal Reserve. This should help pound grow against dollar. If this does not happen, expect a new sell-off of GBP/USD.
For long positions:
Buy when pound hits 1.2697 (green line on the chart) and take profit at the price of 1.2739 (thicker green line on the chart). Growth will occur after a firm stance of the Bank of England on interest rates.
When buying, ensure that the MACD line lies above zero or just starts to rise from it. Pound can also be bought after two consecutive price tests of 1.2672, but the MACD line should be in the oversold area as only by that will the market reverse to 1.2697 and 1.2739.
For short positions:
Sell when pound reaches 1.2672 (red line on the chart) and take profit at the price of 1.2631. Breaking the daily low will lead to sell-offs, continuing the downward trend.
When selling, ensure that the MACD line lies below zero or drops down from it. Pound can also be sold after two consecutive price tests of 1.2697, but the MACD line should be in the overbought area as only by that will the market reverse to 1.2672 and 1.2631.
What's on the chart:
Thin green line - entry price at which you can buy GBP/USD
Thick green line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further growth above this level is unlikely.
Thin red line - entry price at which you can sell GBP/USD
Thick red line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further decline below this level is unlikely.
MACD line- it is important to be guided by overbought and oversold areas when entering the market
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.The material has been provided by InstaForex Company - www.instaforex.com
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