Hourly chart of the GBP/USD pair
The GBP/USD pair also started a strong downward movement at the end of last week. After it had increased for five consecutive months with only occasional minor corrections, such a strong downward movement was expected, but unexpected at the same time. Unexpected - because hardly anyone could predict exactly when the collapse would happen. It happened in the final week of February. The price broke another upward trend line, which confused the whole technical picture again. At this time, the upward trend has been canceled, as the pair fell by more than 300 points in total, however, after such a strong decline, an upward correction is needed. There is neither a downward trend line nor a downward trend channel at this time. Thus, it is not recommended to trade bullish right now, but at the same time the price can move up on Monday. Trading for a fall has become relevant, but at the same time, the downward movement will hardly continue on Monday. Even the MACD indicator has not yet had time to discharge. Thus, despite the strong movement, it is extremely problematic to reject it. Novice traders should remember that a strong move is not only a good opportunity to make money, but also an excellent opportunity to lose. We advise you to trade according to the most understandable movement patterns. That is, a calm movement with corrections, on which trades should be opened following the trend. There is no such thing now.
No important reports from the UK at the end of last week. However, even without this it is clear that the reasons for such a strong growth from the dollar (falling pair = growth of the dollar) lie in the United States. In the article on the euro currency, we have already noted that the reasons are associated with the escalation of the geopolitical conflict in the Middle East and strong US macroeconomic statistics, which traders have finally decided to work out. The question is what will happen next week. Over the weekend, the US Congress approved a new $2 trillion stimulus package and this event could also be reflected on the charts of all currency pairs that include the dollar...
A report on business activity in the manufacturing sector will be released in the UK. A similar report will be published in the US, but both reports are unlikely to provoke a reaction from the market. First, both major pairs need to correct upward after falling late last week. Second, the reports are not the most important. Thirdly, the markets need to digest the information about the approval of the new stimulus package by the US Congress. Fourth, it is necessary to understand what degree of intensity the escalation of the conflict in the Middle East will reach this time.
Possible scenarios on March 1:
1) Long positions have lost their relevance, but at the same time, an upward movement is more likely on Monday. It can even be strong, 100 points, novice traders can try to work it out at their own peril and risk. We would recommend waiting for the markets to calm down before you enter the market.
2) Short positions became relevant after breaking the upward trend line, however, on Monday, an upward movement is much more likely than a downward one. Thus, in order to be able to consider sell signals, the pair needs to correct upward. After that, you can track the sell signals from MACD.
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