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Hourly chart of the GBP/USD pair
The GBP/USD pair rebounded off the 1.3744 level once again on Monday, which is the current local high, and at the same time the peak of the current month and year. The pound/dollar pair has already rebounded from this level 5 times in total, and at the same time it is supported from below by an upward trend line, from which the pair has also rebounded three times over the past few days. The price perfectly bounced from the 1.3744 level and reached the trend line. However, we would not recommend novice traders to trade between these lines. In the previous article, we advised you to only trade up if the price settles above the 1.3744 level (which did not happen), as well as trade down if the price settles below the upward trend line, which also did not happen. Therefore, not a single signal was generated that could be worked out. But at the same time, the price cannot constantly stay between the trend line and the 1.3744 level. As we mentioned earlier, in the coming days the pair may settle above or below this triangle, which will allow us to draw a conclusion about the pair's succeeding direction.
The UK published a manufacturing PMI that slightly exceeded forecasts. And so the pound had more reasons to overcome the 1.3744 level, but instead it was facing a downward movement. We conclude that technical factors are more important right now. But in fairness, take note that today's reports were rather weak. Most embarrassing is that the pair is still ignoring the fundamental background. Even the euro/dollar pair is correcting in January 2021, while the pound is still not.
No major publications scheduled in the UK or the US on Tuesday. Traders also ignore the external fundamental background, so news and reports will not have any impact on the course of trading tomorrow. Therefore, it will be necessary to consider technical signals exclusively. These are rebounds from important support/resistance levels, trend lines, reversals of the MACD indicator.
Possible scenarios on February 2:
1) Long positions remain relevant since the price is still above the trend line. Thus, novice traders are advised to monitor the formation of buy signals. If the price surpasses the 1.3744 level, it will be a buy signal with the 1.3795 resistance level as the target. Also, the pair may rebound off the trend line again, which can also be regarded as a buy signal, but only with the 1.3744 level as the target.
2) You are advised to not consider short positions right now, as the upward trend is maintained for the GBP/USD pair. Thus, you can only open short positions when the price has finally settled below the rising trend line. The targets in this case can be located near support levels 1.3653 and 1.3607.
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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