Trade Analysis and Recommendations for the British Pound

The price test at 1.2612 occurred when the MACD indicator started moving downward from the zero mark, confirming a valid sell entry for GBP/USD, which resulted in a 35-point decline.

Following the release of inflation data in the UK, market participants revised their expectations regarding the Bank of England's future policy. The certainty of swift and aggressive rate cuts has weakened, as the central bank will likely have to maintain tight monetary policy longer than previously expected. This shift has made the British pound more attractive to investors seeking higher yields. However, GBP/USD failed to gain significant bullish momentum. External factors such as geopolitical tensions and energy price fluctuations will also influence the pound's trajectory, making it crucial for traders to monitor these developments closely.

Later today, key U.S. economic data will be released, including building permits and housing starts, along with the FOMC meeting minutes. These reports are interrelated indicators used to assess the economy's overall health. Building permits serve as a leading indicator of future activity in the construction sector, signaling potential growth in housing demand. An increase in housing starts would confirm this trend, reflecting actual new construction projects. Meanwhile, the FOMC minutes will provide insights into the Federal Reserve's outlook on inflation, interest rates, and economic growth, potentially influencing global financial markets.

For intraday strategy, I will focus on the execution of Scenario #1 and Scenario #2 for both long and short positions.

Buy Signal

Scenario #1: Buy GBP/USD if the price reaches 1.2595, aiming for an increase to 1.2623. At 1.2623, I plan to exit and sell the pound for a 30-35 point downward correction. Expect an upward move only if U.S. economic data disappoints. Before buying, ensure that the MACD indicator is above the zero mark and just starting to rise.

Scenario #2: A buy position is also valid if 1.2571 is tested twice, while MACD is in the oversold zone. This setup would indicate limited downward potential and a likely reversal toward 1.2595 and 1.2623.

Sell Signal

Scenario #1: Sell GBP/USD if the price breaks below 1.2571, leading to a quick decline toward 1.2543. At 1.2543, I will exit and enter a buy trade in the opposite direction for a 20-25 point retracement. Selling pressure is likely to increase if the FOMC minutes confirm a hawkish stance. Before selling, confirm that MACD is below the zero mark and beginning to decline.

Scenario #2: Another sell opportunity arises if 1.2595 is tested twice, while MACD is in the overbought zone. This would suggest a reversal downward, with a target of 1.2571 and 1.2543.

Market Notes:

• Thin green line – entry price for buy trades
• Thick green line – expected take-profit area for buy trades, as further growth beyond this level is unlikely
• Thin red line – entry price for sell trades
• Thick red line – expected take-profit area for sell trades, as further decline below this level is unlikely
• MACD Indicator – key tool for identifying overbought and oversold market conditions

Important Trading Advice:

Beginner forex traders should exercise caution when entering the market. Before major economic releases, it is best to stay out of the market to avoid sharp price swings. If trading during news events, always set stop-loss orders to minimize potential losses. Trading without stop-loss protection can result in rapid account depletion, especially when managing large positions without proper risk management.

For successful trading, it is essential to follow a structured trading plan like the one outlined above. Making impulsive decisions based on short-term price movements is a losing strategy for intraday traders.