GBP/USD: Tips for Beginner Traders on January 6th (US Session)

[Ben Graham]

Trade Review and Trading Advice for the British Pound

A test of the 1.3563 price level occurred at the moment when the MACD indicator was just beginning to move upward from the zero line, which seemed like a good entry point to buy the pound in continuation of the bullish market. However, the pair failed to post any growth.

Although the UK Services PMI increased, it came in below economists' forecasts. This moderate improvement nevertheless failed to support market optimism, as analysts had expected a more confident recovery in services activity, which is a key driver of the British economy. The insufficient PMI growth points to ongoing problems in sectors dependent on consumer demand. The impact on the British pound was mixed. On the one hand, remaining above the 50-point mark is a positive signal indicating expansion. On the other hand, disappointing data weakened investor confidence, as a stronger boost from the services sector had been anticipated.

In the second half of the day, the release of the US Services PMI and the Composite PMI is expected. These data, published by S&P Global, are traditionally closely watched by traders and analysts, as they provide insight into the state of the US economy. The services PMI is generally more volatile than the manufacturing PMI, reflecting its dependence on consumer sentiment and spending. The indicators are expected to remain in expansion territory, i.e., above 50 points, signaling continued business activity growth. However, any deviation from forecasts could trigger market volatility.

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

Buy Signal

Scenario No. 1: I plan to buy the pound today when the price reaches the entry level around 1.3539 (green line on the chart), targeting growth toward 1.3562 (thicker green line on the chart). Around 1.3562, I plan to exit long positions and open short positions in the opposite direction, aiming for a 30–35 point move from that level. A rise in the pound today can be expected only if US data turn out to be very weak.Important! Before buying, make sure that the MACD indicator is above the zero line and is just starting to rise from it.

Scenario No. 2: I also plan to buy the pound today in the event of two consecutive tests of the 1.3511 level while the MACD indicator is in oversold territory. This would limit the pair's downward potential and lead to a bullish market reversal. Growth toward the opposite levels of 1.3539 and 1.3562 can be expected.

Sell Signal

Scenario No. 1: I plan to sell the pound today after a breakout below the 1.3511 level (red line on the chart), which would lead to a rapid decline in the pair. The key target for sellers will be the 1.3490 level, where I plan to exit short positions and immediately open long positions in the opposite direction, aiming for a 20–25 point move from that level. Pressure on the pound may return today if US data are strong.Important! Before selling, make sure that the MACD indicator is below the zero line and is just starting to decline from it.

Scenario No. 2: I also plan to sell the pound today in the event of two consecutive tests of the 1.3539 level while the MACD indicator is in overbought territory. This would limit the pair's upward potential and lead to a bearish market reversal. A decline toward the opposite levels of 1.3511 and 1.3490 can be expected.

What's on the Chart:

• Thin green line – entry price for buying the trading instrument;
• Thick green line – projected 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 for selling the trading instrument;
• Thick red line – projected 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 focus on overbought and oversold zones.

Important. Beginner Forex traders should be extremely cautious when making market entry decisions. Before the release of important fundamental reports, it is best to stay out of the market to avoid being caught in sharp price fluctuations. If you decide to trade during news releases, always place stop-loss orders to minimize losses. Without stop-loss orders, you can very quickly lose your entire deposit, especially if you do not use proper money management and trade large volumes.

And remember, successful trading requires a clear trading plan, such as 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