Trade review and tips for trading the British pound

The test of 1.3383 occurred as the MACD indicator began to move up from the zero mark, confirming a valid entry point to buy the pound, but the pair did not go on to rise.

Friday's UK data were a pleasant surprise. The composite PMI for October was 53.1 versus 52.0 in September — an eight-month high; the services index rose to 53.1 from 52.1, and manufacturing output climbed to 53.1 from 51.5. However, U.S. data restored the dollar's initiative and limited the pair's upside potential. The U.S. composite PMI was 57.6, and the manufacturing index rose to 56.0. I believe that if the current sentiment persists sterling can hold its gains, and the next key event is the Bank of England meeting on November 5, where the market sees a real chance of a rate hike.

Today UK data are not the main story, since only one release is on the schedule: the CBI retail-sales balance for October. The survey of retailers reports the balance between those seeing rising sales and those reporting declines. A -55 reading last time signaled extremely weak demand; analysts now expect -47, a less severe drop. The simple conclusion is this: because the market expects only a modest improvement, surprises can come in either direction, but a large impact on quotes is unlikely, since sterling rests on more weighty factors.

For intraday strategy, I will rely more on Scenarios No. 1 and No. 2.

Scenarios for Buying

Scenario No. 1: I plan to buy the pound today when it reaches an entry point around 1.3380 (the green line on the chart), targeting a rise to 1.3402 (the thicker green line on the chart). Around 1.3402, I intend to exit long positions and open short positions in the opposite direction (expecting a 30–35-pip move away from that level). One can count on the pound rising today only after strong data. Important! Before buying, make sure the MACD indicator is above the zero line and is just beginning to rise from it.

Scenario No. 2: I also plan to buy the pound today if it tests 1.3368 twice in a row while 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 to the opposite levels of 1.3380 and 1.3402.

Scenarios for Selling

Scenario No. 1: I plan to sell the pound today after 1.3368 is refreshed (red line on the chart), which will lead to a rapid decline of the pair. The sellers' key target is 1.3346, where I intend to exit shorts and immediately open longs in the opposite direction (expecting a 20–25-pip move away from that level). Bad news will return pressure on the pound. Important! Before selling, make sure the MACD indicator is below the zero line and is just beginning to decline from it.

Scenario No. 2: I also plan to sell the pound today in the event of two consecutive tests of 1.3380 when the MACD indicator is in the overbought area. This will limit the pair's upside potential and lead to a downward reversal. One can expect a decline to the opposite levels of 1.3368 and 1.3346.

What's on the chart:

Thin green line — entry price where you can buy the instrument.

Thick green line — approximate price where you can place Take Profit or manually lock in profits, because further upside above this level is unlikely.

Thin red line — entry price where you can sell the instrument.

Thick red line — approximate price where you can place Take Profit or manually lock in profits, because further downside below this level is unlikely.

MACD indicator. When entering the market, it's important to consider overbought and oversold zones.

Important. Novice Forex traders must be very cautious when deciding to enter the market. It is best to stay out before major fundamental reports to avoid getting 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 quickly lose your entire deposit, especially if you don't use money management and trade large volumes.

Remember: successful trading requires a clear trading plan, like the example above. Spontaneous trade decisions based solely on the immediate market situation are, by definition, a losing strategy for an intraday trader.