Analysis and Trading Tips for the British Pound

The test of the 1.2220 price level during the first half of the day coincided with the MACD indicator already moving significantly below the zero mark, which, in my opinion, limited the pair's downward potential. For this reason, I did not sell and missed the entire downward movement. Buying on the rebound from 1.2185 did not yield significant profit, as the pound failed to deliver a strong upward correction.

Recent data showing a sharp decline in UK retail sales in December took many economists by surprise. The drop in demand in a key economic sector is linked to rising inflation and increased living costs, making consumers more cautious about their spending. These economic realities have prompted investors to revise their forecasts regarding the resilience of the UK economy in an uncertain environment. Markets reacted immediately to the news, with the pound sterling plunging against the US dollar. This situation has raised concerns among economists, who have long warned about worsening economic conditions in the UK. It is expected that this downward consumption trend could worsen further unless measures are implemented to stimulate demand and support residents.

In the second half of the day, US statistics could exacerbate the position of pound buyers. However, for this to happen, data on building permits and housing starts must exceed economists' forecasts. The industrial production report will wrap up the week and could also play a role in directing the GBP/USD pair's movement.

Buy Signal

Scenario #1: I plan to buy the pound today at the 1.2210 entry point (green line on the chart) with a target of 1.2256 (thicker green line on the chart). At 1.2256, I will exit the buy position and open a sell trade for a potential 30-35 point pullback. Pound appreciation today is only likely after weak US statistics.Important: Before buying, ensure that the MACD indicator is above the zero mark and just beginning its upward movement.

Scenario #2: I also plan to buy the pound today in the case of two consecutive tests of 1.2178, with the MACD indicator in oversold territory. This will limit the pair's downward potential and lead to a market reversal upward. Growth toward the opposing levels of 1.2210 and 1.2256 can then be expected.

Sell Signal

Scenario #1: I plan to sell the pound after a break below 1.2178 (red line on the chart), leading to a quick decline in the pair. The key target for sellers will be 1.2136, where I plan to exit the sell position and open a buy trade for a potential 20-25 point pullback. Sellers could show strength at any time if US data is strong.Important: Before selling, ensure that the MACD indicator is below the zero mark and just beginning its downward movement.

Scenario #2: I also plan to sell the pound today in the case of two consecutive tests of 1.2210, with the MACD indicator in overbought territory. This will limit the pair's upward potential and lead to a market reversal downward. Declines toward the opposing levels of 1.2178 and 1.2136 can then be expected.

Chart Overview

• Thin green line: Entry price for buying the instrument.
• Thick green line: Expected price where Take Profit can be set or profits can be manually locked in, as further growth above this level is unlikely.
• Thin red line: Entry price for selling the instrument.
• Thick red line: Expected price where Take Profit can be set or profits can be manually locked in, as further declines below this level are unlikely.
• MACD Indicator: Key for determining overbought and oversold zones when entering the market.

Important Notes for Beginner Traders:

• Exercise caution when making market entry decisions, particularly before the release of significant fundamental reports. Avoid trading during news events to minimize exposure to sharp price swings.
• Always use stop-loss orders to limit losses. Without stop-loss orders, you risk losing your entire deposit, especially when trading large volumes without proper money management.
• A clear trading plan, such as the one outlined above, is essential for successful trading. Spontaneous trading decisions based on current market conditions are typically a losing strategy for intraday traders.