Trade review and trading tips for the British pound

The price test at 1.3442 occurred when the MACD indicator had moved far below the zero line, limiting the pair's downside potential. The second test of 1.3442, a short time later, coincided with the MACD being in the oversold area, which allowed Scenario No. 2 for buying the pound to play out. As a result, the pair rose by more than 20 pips.

US producer-price inflation data for November last year supported the dollar. Acceleration of producer-level inflation typically precedes consumer-price increases, which exerts upward pressure on overall inflation. The market reaction was immediate. The dollar strengthened against the pound. The rise was associated with the fact that strong inflation data increased expectations that the Federal Reserve will remain in a wait-and-see position on interest rates.

Publication of UK economic data will be an important factor shaping sterling dynamics. The change in UK GDP is a key indicator of the country's economic health, reflecting the total value of goods and services produced. Another decline in GDP could raise recession concerns and weaken the pound. The change in industrial production is also an important indicator of economic activity; growth in industrial production points to rising demand and activity, which typically supports the currency, while a decline can indicate a slowdown. The trade balance is unlikely to move GBP/USD much, but a shrinking surplus could be seen as a factor weakening the pound.

Regarding the intraday strategy, I will mainly rely on implementing Scenarios No. 1 and No. 2.

Buy scenarios

Scenario No. 1: I plan to buy the pound today at an entry point around 1.3435 (green line on the chart), targeting a rise to 1.3460 (thicker green line on the chart). Around 1.3460, I intend to exit longs and open shorts in the opposite direction (expecting a 30–35 pip counter-move from that level). Expect the pound to strengthen only after today's good GDP data. Important! Before buying, make sure the MACD indicator is above the zero line and is only beginning to rise from it.

Scenario No. 2: I also plan to buy the pound today in case of two consecutive tests of 1.3422 when the MACD indicator is in the oversold area. This will limit the pair's downside potential and lead to an upward reversal. One can expect a rise toward the opposing levels 1.3435 and 1.3460.

Sell scenarios

Scenario No. 1: I plan to sell the pound today after a break below 1.3422 (red line on the chart), which would trigger a rapid decline in the pair. The key target for sellers will be 1.3397, where I plan to exit shorts and immediately open longs in the opposite direction (expecting a 20–25 pip counter-move from that level). Pound sellers may assert themselves if UK data are weak. Important! Before selling, make sure the MACD indicator is below the zero line and is only beginning to decline from it.

Scenario No. 2: I also plan to sell the pound today if there are two consecutive tests of 1.3435 while the MACD indicator is in the overbought area. This will limit the pair's upside potential and lead to a reversal downward. One can expect a decline toward the opposing levels 1.3422 and 1.3397.

What is on the chart

• Thin green line — entry price at which you can buy the instrument
• Thick green line — suggested Take Profit price or level at which to manually lock in profit, since further rise above this level is unlikely.
• Thin red line — entry price at which you can sell the instrument
• Thick red line — suggested Take Profit price or level at which to manually lock in profit, since further decline below this level is unlikely.
• MACD indicator — when entering the market, it is important to follow the overbought and oversold zones
• Important notes: Beginner forex traders must be very cautious when deciding to enter the market. It is best to be out of the market before major fundamental reports are released to avoid being caught in sharp price swings. If you decide to trade during news releases, always place stop orders to minimize losses. Without stop orders, you can lose your entire deposit quickly, especially if you do not use money management and trade large volumes.
• Remember that successful trading requires a clear trading plan like the one presented above. Spontaneous trading decisions based on current market noise are a losing strategy for the intraday trader.