GBP/USD: Tips for Beginning Traders for November 21st (U.S. Session)

[Ben Graham]

Trade Analysis and Recommendations for the British Pound

The test of the 1.3084 price occurred when the MACD indicator had just started moving down from the zero line, which confirmed the correct entry point for selling the pound. As a result, the pair fell by more than 35 points.

The pound collapsed after a weak UK Services PMI, which dropped to 50.5 points. The decline in the Services PMI is certainly an alarming signal. A reading above 50 indicates expansion of the sector, while a reading below 50 indicates contraction. The 50.5 reading suggests that growth has nearly stalled, and the outlook for the near future appears highly uncertain. Experts cite high inflation—which continues to pressure households and businesses—elevated interest rates, and ongoing uncertainty surrounding the country's future budget as key factors behind the slowdown in service-sector growth.

Next, traders will shift their attention to similar U.S. data. The Manufacturing PMI, the Services PMI, and the Michigan sentiment report will play a key role in determining the direction of the GBP/USD pair. If the indicators show increased manufacturing and service activity, this may signal strengthening in the U.S. economy. In that case, the U.S. dollar will likely strengthen relative to the British pound, leading to a decline in GBP/USD. Conversely, if the PMIs come in below expectations, this may raise concerns about slowing economic growth in the U.S. Investors may then begin selling the dollar, which would strengthen the pound and push GBP/USD higher.

As for the intraday strategy, I will rely more on implementing Scenarios No. 1 and No. 2.

Buy Signal

Scenario No. 1: I plan to buy the pound today if the price reaches the entry point around 1.3068 (green line on the chart), targeting growth to 1.3094 (thicker green line on the chart). Around 1.3094, I will exit long positions and open short positions in the opposite direction (expecting a 30–35 point move in the opposite direction from that level). You can rely on pound growth today only if the data are weak. Important! Before buying, make sure the MACD indicator is above the zero line and only beginning to rise from it.

Scenario No. 2: I also plan to buy the pound today if the price tests 1.3052 twice in a row at a moment when the MACD indicator is in the oversold zone. This will limit the pair's downward potential and lead to a market reversal upward. Growth toward the opposite levels of 1.3068 and 1.3094 can be expected.

Sell Signal

Scenario No. 1: I plan to sell the pound today after the price breaks below 1.3052 (red line on the chart), which will lead to a rapid decline in the pair. Sellers' key target will be the 1.3025 level, where I will exit short positions and immediately open long positions in the opposite direction (expecting a 20–25 point move from the level in the opposite direction). Pressure on the pound will return if the indicators are strong. Important! Before selling, make sure the MACD indicator is below the zero line and only beginning to decline from it.

Scenario No. 2: I also plan to sell the pound today in the event of two consecutive tests of the 1.3068 price when the MACD indicator is in the overbought zone. This will limit the pair's upward potential and lead to a market reversal downward. A decline toward the opposite levels of 1.3052 and 1.3025 can be expected.

Chart Explanation:

• Thin green line – entry price at which the trading instrument can be bought
• Thick green line – expected price where Take Profit can be set or profit can be taken manually, as further growth above this level is unlikely
• Thin red line – entry price at which the trading instrument can be sold
• Thick red line – expected price where Take Profit can be set or profit can be taken manually, as further decline below this level is unlikely
• MACD indicator – when entering the market, it is important to be guided by overbought and oversold zones

Important: Beginning Forex traders must be very careful when making market entry decisions. Ahead of major fundamental reports, it is best to stay out of the market to avoid sharp price swings. If you decide to trade during news releases, always place stop orders to minimize losses. Without stops, you can very quickly lose your entire deposit, especially if you do not use money management and trade large positions.

And remember: to trade successfully, you must have a clear trading plan, like the one presented above. Spontaneous trading decisions based on the current market situation are an inherently losing strategy for an intraday trader.

The material has been provided by InstaForex Company - www.instaforex.com