Hourly chart of the GBP/USD pair
The GBP/USD pair managed to overcome the level of 1.3744 on Tuesday, from which it rebounded six times. However, the seventh attempt to overcome it was successful and the upward movement resumed. At the end of the day, the pound/dollar pair has reached two resistance levels and has stopped just above 1.3791, coming close to the 38th figure. The MACD indicator has long turned down, although the price continues to move up. This indicates another uncorrelation between the indicator and the price. At the moment, an upward trend is being identified for the pair, since the 1.3744 level did not resist the onslaught of buyers. During the day, novice traders could open long positions upon a signal to surpass this level, as we recommended in the last review. You were advised to keep long positions open until the MACD indicator turns down. Thus, beginners could earn around 20 points of profit today. Further upward movement is not obvious. Since last Thursday, the price has been constantly moving upward without forming any corrections (except for a small pullback). Thus, it is possible that by tomorrow the pair will fall by 100 points. The upward trend line clearly shows the current trend for the pair.
No news in the UK on Tuesday. Thus, the markets were trading based solely on technical factors and the general fundamental background, which is still not in favor of the dollar due to one single factor – a stimulus package that is about to be approved by the US Congress. If this happens, then another $2 trillion will flow into the American economy, which, for obvious reasons, may put pressure on the dollar rate. There are no other reasons for the dollar’s fall right now. The pound is rising simply because the dollar is getting cheaper. Meanwhile, the economic situation remains very disappointing in the UK.
Bank of England Governor Andrew Bailey will hold another speech in the UK on Wednesday, and the inflation report will be published in the US. Both events, in certain situations, may not affect the pair’s movement in any way (and, most likely, they will), and in certain situations, they may affect the dollar and the pound. If Bailey says something important about the British economy or monetary policy, then the markets cannot ignore it. If US inflation surprises the markets (it will be very different from the forecasted values), it could also affect the US currency rate. But technical factors will continue to be in the first place.
Possible scenarios on February 10:
1) You are advised to consider long positions again, since traders managed to overcome the 1.3744 level, and an upward trend line was formed. So now beginners need to wait for the price to rebound from the trend line or the MACD indicator to discharge to the zero level and form a new buy signal. Targets will be around the 1.3833 level and 20 points higher.
2) Short positions are not relevant at the moment, since an upward trend has formed. However, if the price settles below the trend line, then the downward movement may continue by several hundred points. Therefore, in this case, you are advised to open short positions with targets at the support levels of 1.3722 and 1.3695.
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.
The material has been provided by InstaForex Company – www.instaforex.com
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