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GBP/USD hourly chart
The GBP/USD pair started a strong downward movement at the end of last week. However, it did not extend it on Monday. The pair was in the phase of correction for the most part of the day. By this moment, it has made a sharp drop and shows signs to resume the downward movement. Thus, the pound/dollar pair, in contrast to the euro/dollar pair, managed to go through a correction. This allowed the MACD indicator to reach the zero level and form a sell signal which is circled in the picture. In our Sunday article, we recommended opening short positions if the MACD indicator generates a strong sell signal. The signal was generated. Therefore, novice traders should have opened short positions. The profit level for this trade was about 47 pips. Thus, this is a high level of profit given that trading was fairly quiet on Monday. You could close the sell deal at that time, or you could wait for the MACD indicator to turn to the upside. In general, the downtrend is likely to persist. However, it is not yet possible to build a trendline or a channel as the movement started too rapidly. Thus, we need to wait for a new sell signal from the MACD indicator.
At the beginning of this week, only the manufacturing PMI was published in the UK. However, all of the macroeconomic statistics published on Monday were ignored. Therefore, technical analysis remains in the first place at this time. Over the weekend, the US Congress approved a new stimulus package for the US economy and this is really big news. However, the Senate has to approve the package as well, and only then will Joe Biden sign it. After that, we can expect a new flow of freshly printed dollars into the US economy which will lead to a new fall in the rate of this currency.
On March 2, no major events or news are scheduled in the UK or the US. Thus, there will be no fundamental background and macroeconomic data on Tuesday. This makes trading easier since traders will need to pay attention only to technical signals.
Possible scenarios on March 2:
1) Buy orders are no longer relevant. Now buyers need to wait for the full completion of the downtrend which is unlikely to happen soon. This will be hard to do since there is no trendline or a channel, and the price has moved far from its 2.5-year highs. In this case, beginners are recommended to wait for the formation of a clear uptrend.
2) Sell orders became relevant after the price has broken through the ascending trendline. At the moment traders should open short positions. If the MACD indicator forms a buy signal in the coming hours, then sell orders can be closed so as not to leave positions overnight. You should monitor new sell signals tomorrow, as the indicator will need to return to the zero level again. The targets will depend on how deep a new round of correction will be.
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 trendlines 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 (14, 22, and 3) 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 patterns (channels and trendlines).
Important announcements and economic reports that you can always find on the economic calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommend trading as carefully as possible or exit the market in order to avoid sharp price fluctuations.
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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