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Hourly chart of the GBP/USD pair
The GBP/USD pair began a new round of upward movement on Tuesday, January 5. We would like to remind you that earlier, like the euro, the pound settled below the trend line, so the trend for the pair changed to a downward one. However, a strong sell signal from MACD was not created. We advised you to consider trading down. The signal from the indicator was created, but it was below the zero level, that is, the MACD did not have time to discharge. This signal was weak and should not be used to open short positions. No other signals were created during the day. Since the price has not yet surpassed the 2.5-year highs, which are located at 1.3703, the downward trend is formally preserved. Thus, we still advise you to consider sell orders. At the moment, the MACD indicator has been discharged enough. Another thing is that the signal can appear at night. In this case, it will be quite problematic to work it out. Also, the price may rise to the 1.3703 level, then the chances for bringing back the upward trend will significantly increase.
Fundamentally, things remain bad for the pound. A third lockdown was announced in Great Britain and, of course, it will affect the British economy. Thus, we expect the GDP to fall. On the other hand, this does not matter for the pound. The British currency both rose in price and continues to increase in price, not paying attention to the fundamental background or macroeconomic reports. Market participants continue to sell off the dollar, although there is simply no visible and compelling reason for this. Nevertheless, this is the reality now and novice traders should understand it.
The UK PMI is scheduled to be published on Wednesday, and the US Federal Reserve Minutes will be published in the evening. As a rule, no fundamentally new information is contained in the minutes. Most likely, it will be the same this time. Both events are unlikely to provoke any market reaction. Thus, technical factors and signals will be prioritized.
Possible scenarios for January 6:
1) Buy orders have lost their relevance, since the pair's quotes have settled below the upward trend line. Thus, in order to be able to consider long positions, you should wait for a new upward trend or the end of the downward trend. This scenario is not expected until Wednesday morning.
2) Selling is relevant now as traders have broken the upward trend line. Thus, at this time you are advised to monitor a new sell signal from MACD. The indicator is already sufficiently discharged and is able to generate a strong signal. The main thing is that, as usual, the upward movement does not resume. In this case, the sell signal may be false. Aim for the support level of 1.3503.
On the chart:
Support and Resistance Levels are the Levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Red lines are the channels or trend lines that display the current trend and show in which direction it is better to trade now.
Up/down arrows show where you should sell or buy after reaching or breaking through particular levels.
The MACD indicator consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend lines (channels and trend lines).
Important announcements and economic reports that you can always find in the news calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommended trading as carefully as possible or exit the market in order to avoid a sharp price reversal.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.
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