Hourly chart of the GBP/USD pair
The GBP/USD pair continued to rise last Thursday morning, but traders quickly calmed down (in contrast to the EUR/USD pair) and a sideways movement began in a narrow channel. Thus, the pound ended 2020 on a positive note, but was absolutely calm. The upward trend line supports bull traders as it has been slightly re-formed. Thus, the upward movement is still relevant now, as well as buy orders. At the same time, there is a very small distance to the trend line itself, which traders can cover in a day or even faster. Therefore, you also need to be prepared for a possible change in trend. In the same way as for the euro, not a single buy signal was generated in the final days of 2020. The MACD indicator never once discharged to the zero level, and the price never approached the trend line. Thus, novice traders could trade bullish, but at their own peril and risk. We still recommend that beginners enter the market only if there are strong and clear signals.
Fundamentally, there is still absolutely nothing to say now. There was a lot of different important information for the pound in the final days of 2020, but the key event - the negotiation of a deal between the UK and the European Union - was one thing. All other events were a consequence of the conclusion of the deal. Thus, we do not believe that news like Prime Minister Boris Johnson's signing of the deal or the agreement of European diplomats to introduce a "temporary use" of the deal in order to ratify it later, could support one or the other currency. Let's remember that the pound grew without any difficulties in 2020, even when there were no particular reasons for this. The euro was also growing and also hitting 2.5-year highs. Therefore, we are even more inclined to think that the US dollar played an important role in strengthening the euro and the pound. No less because of the low demand for this currency, the euro and the pound grew.
The UK is set to publish its Manufacturing PMI on Monday, January 4. The indicator is projected to rise to 57.3. Thus, the pound can get a little more market support, although it absolutely does not need it, since it even managed to end 2020 without the slightest pullback and at absolute highs.
Possible scenarios for January 4:
1) Buy orders are valid again, since the price remains above the trend line. Thus, we recommend that novice traders continue to trade up if the MACD indicator discharges to zero (this requires a correction) and creates a new buy signal. Or the price will rebound off the trend line. Targets - resistance levels 1.3692 and 1.3769.
2) Sell positions are not relevant now, since there is an eloquent upward trend. Thus, to be able to consider shorts, you should wait for the price to settle below the trend line. Targets for short positions - support levels 1.3523 and 1.3446.
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