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Analysis of Trades and Trading Advice for the Pound
A test of the 1.2731 level occurred when the MACD indicator had already moved significantly below the zero line, limiting the pair's downward potential. For this reason, I avoided selling. The pair retested the 1.2731 level while the MACD was in the oversold area, allowing Scenario 2 for buying to play out. As a result, the pair rose by about 25 points before pressure on the pound resumed. The lack of UK statistics prevented sellers from breaking through the monthly low.
In the second half of the day, the US Consumer Price Index (CPI) and core inflation data (excluding food and energy) will be released. A rise in core inflation is likely to strengthen the dollar and push the pound lower, continuing the downtrend. FOMC members Neel Kashkari and Lorie K. Logan are also set to speak. A hawkish tone from these speakers is likely to bolster the dollar. For my intraday strategy, I will focus on Scenario 1, even considering the MACD indicator's readings, as I expect strong, directional movement following the data release.
Buy Signal
- Scenario 1: Plan to buy the pound at 1.2756 (green line on the chart) with a target of 1.2788 (thicker green line on the chart). At 1.2788, I plan to exit and open sell positions for a 30-35 point reversal. Pound strength today will largely depend on weaker-than-expected US data.Important: Before buying, ensure the MACD indicator is above the zero line and showing an initial upward movement.
- Scenario 2: Another buying opportunity arises if the pair retests the 1.2731 level while the MACD is in the oversold area. This will limit the pair's downward potential and likely lead to a market reversal upward. A rise to 1.2756 and 1.2788 can be anticipated if US economic data is weaker than expected.
Sell Signal
- Scenario 1: Plan to sell the pound after it breaks below 1.2731 (red line on the chart), which will likely lead to a quick decline in the pair. The key target for sellers will be 1.2705, where I plan to exit and immediately open buy positions for a 20-25 point reversal. Sellers are likely to respond to stronger-than-expected US inflation data.Important: Before selling, ensure the MACD indicator is below the zero line and just beginning to decline.
- Scenario 2: Another selling opportunity arises if the pair retests 1.2756 while the MACD is in the overbought area. This will limit the pair's upward potential and likely lead to a downward market reversal. A decline to 1.2731 and 1.2705 can be expected.
On the Chart:
- Thin Green Line: Entry price for buying the trading instrument.
- Thick Green Line: Target price for setting Take Profit or manually securing profits, as further growth above this level is unlikely.
- Thin Red Line: Entry price for selling the trading instrument.
- Thick Red Line: Target price for setting Take Profit or manually securing profits, as further decline below this level is unlikely.
- MACD Indicator: Use overbought and oversold zones to assess momentum and make informed entry decisions.
Key Considerations for Beginner Traders
Novice Forex traders must exercise caution when making market entry decisions. It is advisable to stay out of the market before the release of major fundamental reports to avoid sharp price swings. If you choose to trade during news releases, always set stop-loss orders to minimize losses. Without stop-loss orders, you risk significant losses to your trading account, particularly if you neglect money management and trade large volumes.
Remember: Successful trading requires a clear trading plan, like the one outlined above. Spontaneous trading decisions based on the current market situation often lead to suboptimal outcomes for intraday traders.
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