Trade review and tips for trading the British pound

The price test of 1.3539 occurred at a time when the MACD indicator had moved well above the zero line, which limited the pound's upside potential. The second test of 1.3539 triggered Sell Scenario No. 2, but the pair did not decline sharply.

The low volatility in GBP/USD and another failed assault on the weekly high are explained primarily by yesterday's US Labor Day holiday. When the American session is absent, liquidity falls sharply, and without it, buyers find it extremely difficult to force a sustainable breakout, so the pound again hit the upper boundary and rolled over. This was the expected picture for me, since a thin holiday market rarely produces full-fledged breakouts. The absence of any fundamental UK reports also played a role. Without fresh domestic data, the pound lost internal drivers and became entirely dependent on external conditions, keeping the pair inside a sideways channel.

Today parliamentary hearings on the Bank of England's monetary-policy report will be in focus for the pound, and there is a chance of hearing something new that has remained off-camera. Such appearances are interesting because central banks often reveal details of their logic and assess fresh data, shaping rate expectations that directly determine the pound's direction. In my view, the market will look for any hints about how the BoE views recent acceleration in services inflation and the weakening labor market.

Nevertheless, I would not expect frankness: the BoE meets next week, and ahead of that politicians typically avoid sharp statements and do not rush to lay all their cards on the table. I expect the tone of remarks to remain restrained, and in that case the hearings are unlikely to give the pound an independent impulse; it will remain dependent on the external backdrop and dollar dynamics.

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

Buy scenarios

Scenario No. 1: I plan to buy the pound today if the entry point around 1.3543 (the green line on the chart) is reached, with a target to rise to 1.3565 (the thicker green line on the chart). Around 1.3565, I intend to exit long positions and open short positions in the opposite direction (expecting a 30–35 pip move in the opposite direction from that level). Expect pound strength 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 1.3532 twice in a row while the MACD indicator is in an oversold area. This will limit the pair's downside potential and lead to an upward reversal. One can expect a rise toward the opposite levels of 1.3543 and 1.3565.

Sell scenarios

Scenario No. 1: I plan to sell the pound today after the 1.3532 level (the red line on the chart) is breached, which will lead to a rapid decline in the pair. The key target for sellers will be 1.3508, where I plan to exit shorts and immediately open longs in the opposite direction (expecting a 20–25 pip move in the opposite direction from that level). Bad news will bring pressure back 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 1.3543 when the MACD indicator is in an overbought area. This will limit the pair's upside potential and lead to a downward reversal. One can expect a decline toward the opposite levels of 1.3532 and 1.3508.

What to Look for on the Chart:

• Thin Green Line – Entry price at which you can buy the trading instrument;
• Thick Green Line – Estimated price where you can set Take Profit or manually secure profits, as further growth above this level is unlikely;
• Thin Red Line – Entry price at which you can sell the trading instrument;
• Thick Red Line – Estimated price where you can set Take Profit or manually secure profits, as further decline below this level is unlikely;
• MACD Indicator. When entering the market, it's important to consider overbought and oversold zones.

Important: Beginner traders in the Forex market need to be very cautious when making entry decisions. It is best to stay out of the market ahead of significant fundamental reports to avoid being caught in sharp price fluctuations. If you decide to trade during news releases, always set stop orders to minimize losses. Without stop orders, you can quickly lose your entire deposit, especially if you do not employ money management practices and trade large volumes.

Also, remember that successful trading requires a clear trading plan, similar to the one provided above. Making spontaneous trading decisions based on current market conditions is inherently a losing strategy for intraday traders.