Trade Analysis and Recommendations for the British Pound

The test of the 1.2596 level occurred when the MACD indicator had just started moving downward from the zero mark, confirming a valid entry point for selling. As a result, the pair declined by only 10 points, after which demand for the pound returned.

Decent PMI data for the U.K. manufacturing sector supported the pound in the first half of the day. The published figure was slightly better than expected but still remained below the 50-point threshold, signaling economic stagnation. However, this was enough to prevent a deeper decline in the British currency amid ongoing uncertainty surrounding the outlook for the U.K. economy. Overall, the situation for the pound remains complex and contradictory. Positive PMI data provided only temporary support, while key factors determining the currency's trajectory remain inflation, monetary policy, and overall economic conditions.

During the U.S. session, we expect the ISM Manufacturing Index for February and data on construction spending. Economists forecast a slight decline in the ISM index, which could indicate a slowdown in manufacturing sector growth. Investors will closely monitor the employment component of the ISM index to assess the state of the labor market. Construction spending data will reflect the current state of the housing market. A moderate increase is expected, signaling continued construction activity despite higher interest rates. The impact of these reports on the market could be mixed. Weak ISM data could pressure the U.S. dollar, while strong figures may strengthen it. If construction spending exceeds expectations, it could further support the dollar.

For intraday trading, I will focus more on implementing Scenarios #1 and #2.

Buy Signal

Scenario #1: I plan to buy GBP/USD when the price reaches 1.2679 (green line on the chart), targeting 1.2720. At 1.2720, I will exit my long positions and open sell trades, expecting a 30-35 point pullback. The pound's growth today is likely only if U.S. data is weak. Important! Before buying, ensure that the MACD indicator is above zero and just starting to rise.

Scenario #2: I will also consider buying GBP/USD if the price tests 1.2644 twice while the MACD is in the oversold zone. This setup will limit the pair's downward potential and trigger a bullish reversal, with upward targets at 1.2679 and 1.2720.

Sell Signal

Scenario #1: I plan to sell GBP/USD after a breakdown of 1.2644 (red line on the chart), which could trigger a sharp decline. The primary target for sellers will be 1.2601, where I will exit short positions and immediately open buy trades, expecting a 20-25 point pullback. Sellers will likely step in if U.S. data is strong. Important! Before selling, make sure that the MACD indicator is below zero and just starting to decline.

Scenario #2: I will also consider selling GBP/USD if the price tests 1.2679 twice while the MACD is in the overbought zone. This will limit the pair's upward potential and trigger a bearish reversal, with downward targets at 1.2644 and 1.2601.

What's on the Chart?

Thin green line represents the entry price for buying.Thick green line marks the presumed target level for taking profit, as further growth beyond this level is unlikely.Thin red line represents the entry price for selling.Thick red line marks the presumed target level for taking profit, as further decline beyond this level is unlikely.MACD indicator is crucial for determining overbought and oversold conditions before entering a trade.

Important Note for Beginner Traders

New traders should exercise caution when making market entries. It is best to stay out of the market before major fundamental reports to avoid getting caught in sharp price fluctuations. If you choose to trade during high-impact news releases, always use stop-loss orders to minimize potential losses. Without proper risk management, you could quickly lose your entire deposit, especially if trading large volumes.

For successful trading, it is crucial to follow a structured trading plan, like the one outlined above. Making spontaneous trading decisions based on current market conditions is a losing strategy for intraday traders.