Analysis of Trading Setups and Tips for Trading the British Pound

The test of the 1.3267 price level occurred when the MACD indicator had just begun moving upward from the zero line, confirming a valid entry point for buying the pound. As a result, the pair rose by only 11 points.

The pound received the support it had been lacking in recent days: strong domestic economic data. UK GDP increased by 0.7% quarter over quarter in the third quarter and by 1.9% year over year, while the monthly figure for September exceeded expectations, coming in at 0.2%. Industrial production figures followed, showing an increase rather than the expected decline, with output rising by 0.3% in industrial production and by 0.7% in the manufacturing sector. These figures should have strengthened expectations of further Bank of England rate increases, with the current rate standing at 4.00%. Nevertheless, positive UK data are competing with US factors, which currently have a stronger influence on the market. US Treasury yields remain elevated, and the probability of a Fed rate hike in December is estimated at 96%.

Despite receiving relatively strong domestic economic data, the pound will once again become dependent on the dollar in the second half of the day. US weekly jobless claims are due, with forecasts of 195K compared with 189K previously, along with existing home sales, expected at 3.87M compared with 3.99M in the previous reading. These figures are unlikely to be the main market drivers. The primary focus will be on speeches and interviews by FOMC members Hammack, Barr, Goolsbee, and Daly. As noted above, the market estimates the probability of a December Fed rate hike at 96%, and hawkish remarks from these officials could restore demand for the dollar.

As for the intraday trading strategy, greater emphasis will be placed on implementing Scenarios #1 and #2.

Buy Signal

Scenario #1: The pound can be bought today when the price reaches the entry level around 1.3281 (the green line on the chart), with an upward target of 1.3310 (the thicker green line on the chart). Around 1.3310, the long position can be closed and a short position opened in the opposite direction, targeting a 30–35-point move downward from that level. The pound could appreciate today if US economic data comes in weaker than expected. Important! Before buying, make sure that the MACD indicator is above the zero line and has just started moving upward from it.

Scenario #2: The pound can also be bought today if the price tests the 1.3265 level twice consecutively while the MACD indicator is in the oversold zone. This would limit the pair's downward potential and could trigger an upward market reversal. An increase toward the opposite levels of 1.3281 and 1.3310 can then be expected.

Sell Signal

Scenario #1: The pound can be sold today following a break below 1.3265 (the red line on the chart), which could trigger a rapid decline in the pair. The key target for sellers will be 1.3239, where the short position can be closed and a long position opened immediately in the opposite direction, targeting a 20–25-point upward move from that level. Strong selling pressure on sterling could return if US economic data comes in stronger than expected. Important! Before selling, make sure that the MACD indicator is below the zero line and has just started moving downward from it.

Scenario #2: The pound can also be sold today if the price tests the 1.3281 level twice consecutively while the MACD indicator is in the overbought zone. This would limit the pair's upward potential and could trigger a downward market reversal. A decline toward the opposite levels of 1.3265 and 1.3239 can then be expected.

What the Chart Shows

• Thin green line – the entry price at which the trading instrument can be bought.
• Thick green line – the estimated price level at which a Take Profit order can be placed or profits can be closed manually, as further upward movement above this level is unlikely.
• Thin red line – the entry price at which the trading instrument can be sold.
• Thick red line – the estimated price level at which a Take Profit order can be placed or profits can be closed manually, as further downward movement below this level is unlikely.
• MACD indicator. When entering the market, it is important to consider the overbought and oversold zones.

Important. Beginner Forex traders should exercise extreme caution when making entry decisions. It is generally best to stay out of the market ahead of major fundamental data releases to avoid exposure to sharp price fluctuations. If trading during news releases, always place Stop Loss orders to minimize potential losses. Without Stop Loss orders, the entire trading account can be lost very quickly, especially if proper money management is not applied and large position sizes are used.

Remember that successful trading requires a clear trading plan, such as the one outlined above. Making spontaneous trading decisions based on current market conditions is inherently an unsuccessful strategy for an intraday trader.