Analysis of Trades and Trading Advice for the British Pound

The test of 1.3210 occurred when the MACD indicator had just started moving upward from the zero line, confirming the validity of the entry point for buying the pound. As a result, the pair rose toward the target level of 1.3232.

For the Bank of England, today's services PMI served as a reminder of an issue that many had hoped was no longer a major concern. The final business activity index came in at 52.1 points versus 51.7 points in the preliminary estimate, and the pound, which had been declining since the morning, used this result to recover. The figure was higher a month earlier, at 52.5, but more importantly, the indicator remains above the second-quarter average, and there are no signs of a sudden decline in the services sector.

However, the most important aspect is the structure of this growth. New orders increased only slightly, while overseas orders declined, as did employment. In other words, domestic demand remains weak, external demand is deteriorating, and companies continue to reduce staff. This is an unfavorable balance for the economy, and by itself it would not explain why the pound should attract buying interest. The explanation comes from prices. Input costs increased at their fastest pace since June, while output prices rose at their fastest pace since May, with higher fuel prices caused by the conflict in the Middle East being the main reason. This means that even with weak demand, companies are being forced to raise prices, which is the most difficult situation for the central bank. Bailey and his colleagues cannot rely on a weak labor market to bring inflation down on its own, and the arguments in favor of a restrictive monetary policy are becoming stronger. The market is pricing in a higher interest rate, which is providing support for the pound.

The second half of the day will bring the US services PMI for September, the composite PMI, and the ISM services business activity index. If the data are strong, pressure on the pair will return fairly quickly, and pound buyers will face significant difficulties in maintaining upward pressure. Weak data, on the other hand, would create conditions for the pound to continue recovering after Friday's labor market report.

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

Buy Signal

Scenario No. 1: I plan to buy the pound today when the price reaches the entry point around 1.3229 (the thin green line on the chart), targeting a rise toward 1.3246 (the thicker green line on the chart). Around 1.3246, I will close long positions and open short positions, targeting a move of 30–35 points in the opposite direction from the level. A rise in the pound today can be expected only if the US data are significantly weaker than expected. Important! Before buying, make sure that the MACD indicator is above the zero line and has only just started rising from it.

Scenario No. 2: I also plan to buy the pound today if the price tests 1.3218 twice consecutively while the MACD indicator is in the oversold area. This will limit the pair's downward potential and may result in an upward reversal. A rise toward the opposite levels of 1.3229 and 1.3246 can be expected.

Sell Signal

Scenario No. 1: I plan to sell the pound today after the 1.3218 level is updated (the thin red line on the chart), which should lead to a rapid decline in the pair. The key target for sellers will be 1.3207, where I will close short positions and immediately open long positions, targeting a move of 20–25 points in the opposite direction from the level. Strong selling pressure on the pound will return if the economic data are strong. Important! Before selling, make sure that the MACD indicator is below the zero line and has only just started falling from it.

Scenario No. 2: I also plan to sell the pound today if the price tests 1.3229 twice consecutively while the MACD indicator is in the overbought area. This will limit the pair's upward potential and may result in a downward reversal. A decline toward the opposite levels of 1.3218 and 1.3207 can be expected.

What the Chart Shows:

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

Important. Beginner Forex traders should make entry decisions very carefully. Before the release of important fundamental reports, it is generally best to remain out of the market to avoid exposure to sharp exchange-rate fluctuations. If you decide to trade during news releases, always use stop orders to minimize losses. Without stop orders, you can lose your entire account balance very quickly, especially if you do not use proper money management and trade with large position sizes.

Remember that successful trading requires a clear trading plan, such as the one presented above. Making spontaneous trading decisions based on the current market situation is inherently an unsuccessful strategy for an intraday trader.