Analysis of transactions in the GBP / USD pair
Demand for the pound rose last Thursday on the news that the UK and EU concluded a trade deal. A strong buy signal emerged, and although the quote did not reach the target level, the transaction was still profitable since GBP / USD jumped 50 pips up from 1.3565. To add to that, the MACD line was slightly above zero when the signal appeared, which indicated that a new upward trend is starting.
Trading recommendations for December 28
Demand for the pound has declined a bit, especially since a Brexit trade deal has been concluded. Moreover, the current epidemiological situation in the UK is escalating, so traders are having increased fears over what will happen next year. Aside from the fact that authorities have imposed tougher quarantine restrictions, it is also unclear how the Bank of England will act next year, therefore, growth prospects for the pound became uncertain. There is even a high chance that GBP / USD will move downwards soon.
Going back to the trade agreement, its conclusion does not automatically mean that the parliaments will ratify it, though there is very little chance that such a scenario will happen.
For long positions:
Buy the pound when the quote reaches 1.3577 (green line on the chart), and then take profit at the level of 1.3636 (thicker green line on the chart). Demand for the currency will increase even further if the UK and EU parliaments finally ratifies the Brexit trade deal.
But keep in mind that before buying, make sure that the MACD line is above zero and is starting to rise from it.
For short positions:
Sell the pound after the quote reaches 1.3536 (red line on the chart), and then take profit at the level of 1.3463. Demand for the currency is expected to decline due to lack of positive news and uncertainty among traders.
Also, keep in mind that before selling, make sure that the MACD line is below zero and is starting to move down from it.
What's on the chart:
The thin green line is the key level at which you can place long positions in the GBP/USD pair.
The thick green line is the target price, since the quote is unlikely to move above this level.
The thin red line is the level at which you can place short positions in the GBP/USD pair.
The thick red line is the target price, since the quote is unlikely to move below this level.
MACD line - when entering the market, it is important to be guided by the overbought and oversold zones.
Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes.
And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decisions based on the current market situation is an inherently losing strategy for an intraday trader.
The material has been provided by InstaForex Company - www.instaforex.com