Relevance up to 04:00 2022-01-20 UTC+00
Analysis of transactions in the GBP / USD pair
GBP/USD reached 1.3645 at a time when the MACD line was moving above zero. That prompted a signal to buy in the market, but did not result in a sharp increase as expected. After a while, the same situation emerged, however, the indicator was in the overbought area, so the signal was to sell the pound. It led to a 30-pip decrease in the pair.
In the afternoon, the quote hit 1.3620, and this time the indicator was far below zero. This limited the downside potential of the pair, so bears had no chance to take short positions. Some time after, the indicator moved to the oversold area, but the longs only led to losses. Buying along the rebound also gave no more than 15-pip increase.
Pound rose early Tuesday because data on the UK labor market exceeded expectations. But by afternoon there was a decline in GBP/USD, driven by the reports on US manufacturing and housing starts. Expectations of an early rate hike also fueled demand for dollar
Today, the UK will release data on inflation, which could lead to a bullish correction in the market. Statements from Bank of England chief Andrew Bailey could also affect the direction of the pair. In the afternoon, reports on the US housing market will be published, and it may lead to an increase in dollar.
For long positions:
Buy pound when the quote reaches 1.3607 (green line on the chart) and take profit at the price of 1.3645 (thicker green line on the chart). Growth will continue if data from the UK exceed expectations.
Before buying, make sure that the MACD line is above zero, or is starting to rise from it. It is also possible to buy at 1.3584, however, the MACD line should be in the oversold area as only by that will the market reverse to 1.3607 and 1.3645.
For short positions:
Sell pound when the quote reaches 1.3584 (red line on the chart) and take profit at the price of 1.3544. Pressure will return if inflation in the UK is lower than expected and if Andrew Bailey takes a less aggressive stance on monetary policy.
Before selling, make sure that the MACD line is below zero, or is starting to move down from it. Pound can also be sold at 1.3607, but the MACD line should be in the overbought area, as only by that will the market reverse to 1.3584 and 1.3544.
What’s on the chart:
The thin green line is the key level at which you can place long positions in the GBP/USD pair.
The thick green line is the target price, since the quote is unlikely to move above this level.
The thin red line is the level at which you can place short positions in the GBP/USD pair.
The thick red line is the target price, since the quote is unlikely to move below this level.
MACD line – when entering the market, it is important to be guided by the overbought and oversold zones.
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 decisions based on the current market situation is an inherently losing strategy for an intraday trader.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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