Trade review and tips for trading the British pound

The price test at 1.3324 occurred as the MACD indicator began moving up from the zero line, confirming a valid entry point to buy the pound. However, the pair did not go on to a large advance.

Sterling could not withstand dollar pressure yesterday, even though it had previously looked like the most resilient currency. U.S. data proved too strong, which is bad news for the pound because it gives the Federal Reserve more reasons to tighten policy.

But today the pound faces its own shocks. Chancellor John Healey will present his first annual budget and autumn forecast, and his task is difficult: calm the gilt market without provoking revolt inside his own party. The Treasury is signaling caution — promising not to raise main taxes, ruling out an increase in capital-gains tax (a contentious issue for many MPs), and planning to fund temporary support for vulnerable households via the banking sector. The most painful decisions, including on defense and welfare, have been deferred.

There is reason to expect sterling to rise, however. If Healey presents a credible plan without creative accounting, gilt yields — which hit decade highs in early October — should continue to fall and investors could return to U.K. bonds. That would remove one of the main sources of pressure on the pound, especially with a Bank of England rate hike expected on November 5.

For intraday strategy, I will mainly rely on Scenarios No. 1 and No. 2.

Scenarios for Buying

Scenario No. 1: I plan to buy the pound today at an entry around 1.3294 (the green line on the chart), targeting 1.3316 (the thicker green line on the chart). Around 1.3316, I intend to exit long positions and open short positions in the opposite direction (anticipating a 30–35-pip move from that level). You can count on sterling rising today only after the budget situation becomes clear. Important! Before buying, make sure the MACD indicator is above zero and is just beginning to rise from it.

Scenario No. 2: I also plan to buy the pound today if it tests 1.3278 twice in a row while the MACD indicator is in the oversold area. This will limit the pair's downside potential and trigger a market reversal upward. One can expect a rise to the opposite levels of 1.3294 and 1.3316.

Scenarios for Selling

Scenario No. 1: I plan to sell the pound today after 1.3278 is breached (red line on the chart), which will lead to a rapid decline of the pair. The sellers' key target will be 1.3250, where I intend to exit shorts and immediately open longs in the opposite direction (expecting a 20–25-pip move from that level). Bad news will return pressure on the pound. Important! Before selling, make sure the MACD indicator is below zero and is just beginning to fall from it.

Scenario No. 2: I also plan to sell the pound today in the event of two consecutive tests of 1.3294 when the MACD indicator is in the overbought area. This will limit the pair's upside potential and lead to a downward reversal. One can expect a decline to the opposite levels of 1.3278 and 1.3250.

What's on the chart:

Thin green line — entry price where you can buy the instrument.

Thick green line — approximate price where you can place Take Profit or manually lock in profits, because further upside above this level is unlikely.

Thin red line — entry price where you can sell the instrument.

Thick red line — approximate price where you can place Take Profit or manually lock in profits, because further downside below this level is unlikely.

MACD indicator. When entering the market, it's important to consider overbought and oversold zones.

Important. Novice Forex traders must be very cautious when deciding to enter the market. It is best to stay out before major fundamental reports to avoid getting caught in sharp price swings. If you decide to trade during news releases, always place stop orders to minimize losses. Without stop orders, you can quickly lose your entire deposit, especially if you don't use money management and trade large volumes.

Remember: successful trading requires a clear trading plan, like the example above. Spontaneous trade decisions based solely on the immediate market situation are, by definition, a losing strategy for an intraday trader.