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The first test of 1.2503 in the morning session occurred when the MACD indicator had already moved significantly above the zero mark, limiting the pair's upward potential. Because of this, I did not buy the pound. The second test of 1.2503 while MACD was in the overbought zone triggered Scenario #2 for a sell trade, which resulted in a 30-point drop.
News that the UK GDP exceeded economists' forecasts initially boosted the pound, but the rally was short-lived. The market reacted cautiously, quickly shifting focus to the long-term implications for monetary policy.
Speculation has increased that the Bank of England (BoE) may continue cutting rates to stimulate growth, given the economy's resilience. This weighs on the pound, as lower interest rates reduce the attractiveness of GBP-denominated assets for investors seeking yield. While short-term speculation may push the pair higher, fundamental factors, such as the interest rate differential between the UK and other major economies, will continue to have a significant influence.
Today, U.S. Producer Price Index (PPI) data is set for release, and it is expected to show a moderate increase, reflecting inflationary pressures in the production sector. The core PPI, which excludes volatile food and energy prices, is also projected to rise moderately, signaling persistent underlying inflation.
Stronger-than-expected PPI may increase concerns about inflation persistence, pushing the Fed toward a more aggressive rate stance, which would support the U.S. dollar and pressure GBP/USD. Weaker-than-expected data may indicate easing inflationary pressures, allowing the Fed to take a more cautious approach.
Market reaction will likely depend on how much actual data deviates from forecasts.
For today's intraday strategy, I will primarily focus on executing Scenarios #1 and #2.
Buy Signal
Scenario #1: I plan to buy the pound if the price reaches 1.2508 (green line on the chart), aiming for a rise to 1.2539 (thicker green line on the chart). At 1.2539, I will exit buy trades and open short positions in the opposite direction, expecting a 30-35 point pullback. A bullish pound scenario is only valid if U.S. inflation data is weak.
Important: Before buying, ensure the MACD indicator is above the zero mark and just starting to rise.
Scenario #2: I also plan to buy GBP/USD if there are two consecutive tests of 1.2486, while the MACD is in the oversold zone. This will limit the pair's downward potential and may trigger a market reversal. Targets: 1.2508, 1.2539
Sell Signal
Scenario #1: Selling the pound is possible after the price breaks below 1.2486 (red line on the chart), leading to a sharp decline. The key target for sellers will be 1.2459, where I will exit short trades and buy in the opposite direction, expecting a 20-25 point retracement.
Important: Before selling, ensure the MACD indicator is below the zero mark and just starting to decline.
Scenario #2: I also plan to sell GBP/USD if there are two consecutive tests of 1.2508, while the MACD is in the overbought zone. This setup will limit the pair's upward potential and may lead to a market reversal downward. Targets: 1.2486, 1.2459
Key Chart Levels:
Important Notes for Beginner Traders:
Exercise Caution – Avoid opening new trades before major economic reports to prevent sudden price fluctuations.
Use Stop-Loss Orders – If you trade during high-impact news releases, always set stop-loss orders to minimize potential losses. Without stop-losses, you risk rapid account depletion, especially if money management is not followed or if large lot sizes are used.
Follow a Structured Trading Plan – Spontaneous trading decisions based on current market conditions are a losing strategy for intraday traders. A clear trading plan, like the one outlined above, is essential for consistent success.
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