Hourly chart of the GBP/USD pair
The GBP/USD pair rebounded off the 1.3744 level once again last Friday, January 29, which is the current local high, as well as the current month's, 2021 and for the last 2.5 years. The pound/dollar pair has already bounced from this level four times in total, and at the same time it is supported by an upward trend line from below, from which the pair has rebounded by only three times in the last few days. After rebounding from the 1.3744 level last Friday, the quotes naturally rushed to the trend line, around which they made a new upward reversal and reached the 1.3744 level again, from which they bounced again. A buy signal from the MACD indicator was formed during the day, which, since it is located below the zero level, turned to the upside. However, as we have already mentioned, the price failed to rise above the 1.3744 level, so the highest that novice traders could earn was 30 points. In principle, it is also not bad on an almost flat movement. The technical picture is now utterly prosaic. Top - 1.3744 level, bottom - trend line. Which one of these obstacles will the price overcome in the coming days?, most likely, the pair will continue to move in that direction. Of course, there is a third option: the price will simply continue to move sideways and, as it were, will exit the triangle not through a breakout of one of its borders. This is a rather difficult moment for beginners, so we recommend trading up or down only with a clear and unambiguous breakout of one of the boundaries.
No macroeconomic report from the UK last Friday, and, in principle, there is no need to talk about the foundation's influence on the pair's movement when it is clamped in a very narrow range. Thus, there was no news in the UK, and there were only minor reports from America, which did not cause any significant reaction among market participants. Consequently, one should now trade according to technique, or, to be more precise, expect the pair to leave the triangle.
The UK Manufacturing PMI is set to be released on Monday, February 1, and is expected to remain above 50.0, reflecting the good health of the manufacturing sector and its growth. Traders expect to see a reading of 52.9 in December, but even if it is slightly lower, it will not be too disappointing. The US ISM PMI could have had a bigger impact, but it is also unlikely to decline much from the previous month (60.7). Overall, we do not believe these reports will have a significant impact on market sentiment.
Possible scenarios on February 1:
1) Long positions remain more relevant as the price continues to be above the trend line. And so 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 target at the 1.3814 resistance level. The pair may also bounce off the trend line again, which can also be regarded as a buy signal, but only with the target at the 1.3744 level.
2) You should not consider selling right now, as the upward trend is still present for the pound/dollar pair. Thus, beginners are advised to open short positions when the price has finally settled below the rising trend line. Targets in this case can be located near the support level of 1.3582.
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