GBP/USD: Tips for Beginner Traders on January 28th (U.S. Session)

[Ben Graham]

Trade Analysis and Trading Tips for the British Pound

The test of the 1.3810 price level occurred at a moment when the MACD indicator was just beginning to move upward from the zero line, which confirmed a correct entry point for buying the pound. As a result, the pair rose by only 15 points.

Given the lack of economic data and the approaching events, pound buyers were not very active during the first half of the day. Ahead of us is the FOMC decision on the key interest rate, the accompanying statement, and the press conference by Federal Reserve Chairman Jerome Powell. The intrigue lies in how willing Powell is to acknowledge inflationary pressure that could return to the economy due to the rapidly weakening dollar. However, restrained rhetoric aimed at supporting economic growth may trigger a new round of rally in the British pound and a decline in the U.S. dollar. Particular attention will be paid to the assessment of the labor market. The Fed has repeatedly stated its commitment to achieving full employment, but the pace of labor market recovery is still lagging behind expectations.

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 upon reaching an entry point around 1.3788 (green line on the chart), with a growth target at the 1.3822 level (thicker green line on the chart). Around 1.3822, 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). Today, a rise in the pound can be expected after a dovish stance by Powell.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 event of two consecutive tests of the 1.3758 price level while the MACD indicator is in the oversold area. This will limit the pair's downward potential and lead to a bullish market reversal. A rise toward the opposite levels of 1.3788 and 1.3822 can be expected.

Sell Signal

Scenario No. 1: Today, I plan to sell the pound after the 1.3758 level is broken (red line on the chart), which will lead to a rapid decline in the pair. The key target for sellers will be the 1.3725 level, where I will exit short positions and 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 will return today if the Fed takes a hawkish stance.Important! Before selling, make sure that 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 1.3788 price level while the MACD indicator is in the overbought area. This will limit the pair's upward potential and lead to a bearish market reversal. A decline toward the opposite levels of 1.3758 and 1.3725 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 fixed 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 fixed manually, as further decline below this level is unlikely;
• MACD indicator – when entering the market, it is important to consider overbought and oversold zones.

Important. Beginner Forex traders should be extremely cautious when making market entry decisions. Before the release of major 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 orders to minimize losses. Without stop 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, 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