Hourly chart of the GBP/USD pair
The GBP/USD pair simply continued its upward movement without any hints of a correction last Friday. Thus, the upward trend continues, but, unfortunately, it does not add any clarity to the current technical picture. Recently, three upward trend lines have already been formed, each of which was canceled, afterwards the upward movement resumed. Thus, the pound continues to move extremely chaotic and is difficult to predict. Based on this, we believe that you should be extremely careful when working with this pair, or do not try to work it out at all. Too many false signals have been generated lately. Not a single trading signal on Friday, and this is probably for the best. We remind you that it is extremely difficult to find reasons for the pound's growth. It is difficult to even explain why the pound continues to rise. Macroeconomic statistics are ignored, global factors are too contradictory to draw conclusions on. Last Friday, we advised you to buy the pair if a new buy signal from the MACD indicator is generated. No such signal was generated during the day.
The UK published indexes of business activity in the services and manufacturing sectors. Quite unexpectedly, business activity in the service sector rose from 39.5 to 49.7, which is very positive news for the British economy. Recall that over the same period, business activity in the EU services sector declined. Thus, we can conclude that the reason why the pound rose in price in the first half of the day was due to statistics from Britain. But what about the US reports, which also turned out to be strong and better than the predicted values? Logically, they were supposed to support the dollar. However, if the euro/dollar pair began to correct by the end of the day, then the pound/dollar pair did not (25 points of downward movement at the end of trading is not a correction). Thus, we conclude that the statistics were ignored, and the upward movement of the pair in the morning is just a coincidence. Markets continue to buy the pound solely due to the speculative factor.
No major releases scheduled in the UK and US on Monday, February 22. We expect a correction in the euro/dollar pair, but anything can happen for the pound/dollar pair. No global topics recommended to track right now. The only thing is that we are waiting for is the new stimulus package for the American economy, which was proposed by Joe Biden and which must now be approved by the US Congress.
Possible scenarios on February 22:
1) Long positions became relevant again, since a new upward trend line was formed. Thus, novice traders are advised to wait for a downward correction and a buy signal in the form of an upward reversal of the MACD indicator or a price rebound from a new trend line. The targets in this case will be located at a distance of 50-60 points from the entry point.
2) Short positions have lost their relevance again, therefore, in order to be able to consider them, you need to wait for the price to fall beyond the upward trend line. Even if it happens tomorrow, it is unlikely that the pound will fall much in price after this event. At the moment, the price and the trend line are separated by about 130 points.
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