GBP/USD: Tips for Beginner Traders on January 5th (U.S. Session)

[Ben Graham]

Trade Breakdown and Tips for Trading the British Pound

The test of the 1.3435 price level occurred when the MACD indicator had already moved well above the zero line, which limited the pair's upward potential. For this reason, I did not buy the pound.

An increase in the number of approved mortgage applications and growth in net lending to individuals in the U.K., together with the M4 money supply, had a positive impact on the British pound. These indicators point to strengthening consumer confidence and increased activity in the housing market, which in turn is an important sign of economic health. A rise in the number of approved mortgages suggests that more people feel financially stable and confident in their ability to manage long-term financial commitments. This is undoubtedly a positive signal for the pound, as it reflects optimism about the future of the U.K. economy.

In the second half of the day, the ISM Manufacturing Index published by the Institute for Supply Management will be an important indicator of the condition of the U.S. manufacturing sector. The index is calculated based on a survey of purchasing managers at manufacturing companies across the country. A reading above 50 indicates expansion in manufacturing activity, while a reading below 50 signals contraction. A weak ISM manufacturing report could point to a slowdown in U.S. economic growth, which in turn could weaken the U.S. dollar against the pound.

As for the intraday strategy, I will rely primarily on the implementation of Scenarios No. 1 and No. 2.

Buy Signal

Scenario No. 1: I plan to buy the pound today when the entry point around 1.3461 is reached (the green line on the chart), with a target of growth toward the 1.3485 level (the thicker green line on the chart). Around 1.3485, I will exit long positions and open short positions in the opposite direction (expecting a move of 30–35 points in the opposite direction from that level). A rise in the pound today can be expected only in the event of very poor U.S. 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 in the event of two consecutive tests of the 1.3445 price level while the MACD indicator is in oversold territory. This will limit the pair's downward potential and lead to a bullish market reversal. A rise toward the opposite levels of 1.3461 and 1.3485 can be expected.

Sell Signal

Scenario No. 1: I plan to sell the pound today after a breakout below the 1.3445 level (the red line on the chart), which should lead to a quick decline in the pair. The key target for sellers will be the 1.3424 level, where I will exit short positions and also immediately open long positions in the opposite direction (expecting a 20–25 point move in the opposite direction from that level). Pressure on the pound may return today if strong U.S. data are released.Important! Before selling, make sure the MACD indicator is below the zero line and is just beginning to fall from it.

Scenario No. 2: I also plan to sell the pound today in the event of two consecutive tests of the 1.3461 price level while the MACD indicator is in overbought territory. This will limit the pair's upward potential and lead to a bearish market reversal. A decline toward the opposite levels of 1.3445 and 1.3424 can be expected.

What's on the Chart:

• Thin green line – entry price at which the trading instrument can be bought;
• Thick green line – estimated price where Take Profit orders can be placed or profits can be manually secured, as further growth above this level is unlikely;
• Thin red line – entry price at which the trading instrument can be sold;
• Thick red line – estimated price where Take Profit orders can be placed or profits can be manually secured, as further decline below this level is unlikely;
• MACD indicator – when entering the market, it is important to rely on overbought and oversold zones.

Important. Beginner Forex traders should be extremely cautious 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-loss orders to minimize losses. Without stop-loss orders, you can lose your entire deposit very quickly—especially if you do not use proper money management and trade large volumes.

And remember that successful trading requires a clear trading plan, like the one presented above. Making spontaneous trading decisions based on the current market situation is an inherently losing strategy for an intraday trader.

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