GBP/USD: Tips for Beginner Traders on January 9th (U.S. Session)

[Ben Graham]

Trade Analysis and Tips for Trading the British Pound

The test of the 1.3422 price level occurred at a moment when the MACD indicator had moved significantly below the zero line, which limited the pair's downward potential. For this reason, I did not sell the pound.

A lot of important statistics lie ahead. Data are expected on U.S. nonfarm payroll employment, the unemployment rate, and changes in average hourly earnings. The University of Michigan Consumer Sentiment Index and inflation expectations will also be released. These data will serve as important benchmarks for understanding the current state of the U.S. economy and, accordingly, for forecasting the Federal Reserve's next steps. In particular, strong labor market data could push the Fed toward a more gradual reduction in interest rates this year. The unemployment rate is a key indicator of economic health. A decline in unemployment signals rising employment and improving economic prospects for the population, which could support the U.S. dollar. The University of Michigan Consumer Sentiment Index and inflation expectations, in turn, will show how consumers assess the current economic situation and what they expect regarding future inflation. These data may have a noticeable impact on consumer spending, which is an important component of the U.S. economy.

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

Buy Signal

Scenario No. 1: Today, I plan to buy the pound when the price reaches the entry level around 1.3420 (green line on the chart), with a target of growth toward the 1.3475 level (the thicker green line on the chart). Around 1.3475, I will exit long positions and open short positions in the opposite direction (aiming for a 30–35 point move in the opposite direction from that level). Pound growth today can only be expected in the case of very weak U.S. data.Important! Before buying, make sure that 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 case of two consecutive tests of the 1.3391 price level when the MACD indicator is in the oversold zone. This will limit the pair's downward potential and lead to a reversal of the market upward. Growth toward the opposite levels of 1.3420 and 1.3475 can be expected.

Sell Signal

Scenario No. 1: Today, I plan to sell the pound after a break below the 1.3391 level (red line on the chart), which should lead to a rapid decline in the pair. The key target for sellers will be the 1.3345 level, where I will exit short positions and also open long positions in the opposite direction (aiming for a 20–25 point move in the opposite direction from that level). Pressure on the pound may return today in the case of strong U.S. data.Important! Before selling, make sure that 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 case of two consecutive tests of the 1.3420 price level when the MACD indicator is in the overbought zone. This will limit the pair's upward potential and lead to a reversal of the market downward. A decline toward the opposite levels of 1.3391 and 1.3345 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 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 – estimated price where Take Profit orders can be placed or profits 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. Beginner Forex traders should be very cautious when making market entry decisions. Ahead of major fundamental reports, it is best to stay out of the market to avoid 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 money management and trade large volumes.

And remember that 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