Trade analysis and tips for the British pound

The test of 1.3218 occurred as the MACD indicator began moving down from the zero line, confirming a good entry point to sell the pound. As a result, the pair fell about 20 pips.

The dollar eased slightly yesterday against the pound after the US ISM services report, but it remained strong, and the data contained several worrying signals. The activity index fell 0.5 points to 54.9, while the prices-paid component surged to 74 — the highest since July 2022 — driven by expensive fuel and freight. UK data released yesterday show a somewhat similar problem. The final services PMI came in at 52.1 versus 51.7 (August was 52.5), and the index remains above the Q2 average. The picture should have helped the pound, but a strong dollar offset the effect.

Today the pound faces tests on two fronts, and the second part of the program may be more interesting. First, the market will get the construction PMI, expected to recover modestly to 45 in September from 44.3 in August. The 50 mark separates expansion from contraction, so this is not about a boom but whether the decline slows. Construction is the weakest link in the UK economy: July data showed a notable industry drop and social-housing work fell significantly over three months. If the actual print exceeds 45, the pound would have a reason to rise slightly.

However, for the pound, the PMI is only a detail in the broader picture: the main drivers remain rate expectations and the budget story. That is why Catherine Mann's speech deserves attention. She is one of the MPC members who voted in July for immediate tightening, and her assessment of inflation risks can set the day's tone. The market already knows the central bank is balancing a cooling labour market against price pressures, so traders are looking for confirmation of how hawkish her rhetoric will be.

For intraday strategy, I will rely mainly on Scenario 1 and Scenario 2.

Scenarios to buy

Scenario 1: Buy the pound today if price reaches the entry area around 1.3214 (green line) with a target of 1.3234 (thicker green line). Around 1.3234, plan to exit long positions and open short positions for a counter-move (expecting 30–35 pips from the entry). Expect pound strength only after good data. Important: before buying, ensure MACD is above zero and only beginning its rise.

Scenario 2: Also buy if there are two consecutive tests of 1.3203 while MACD is in the oversold area. This would limit downside potential and trigger an upward reversal. Expect moves to 1.3214 and 1.3234.

Scenarios to sell

Scenario 1: Sell the pound after the 1.3203 level is breached (red line); this should lead to a rapid decline. The sellers' key target is 1.3185, where I plan to exit shorts and immediately open longs for a counter-move (expecting 20–25 pips). Bad news will put pressure back on the pound. Important: before selling, ensure MACD is below zero and only beginning its decline.

Scenario 2: Also sell if there are two consecutive tests of 1.3214 while MACD is in the overbought area. This would cap upside and trigger a downward reversal. Expect declines to 1.3203 and 1.3185.

What's on the chart:

Thin green line – entry price at which you can buy the trading instrument.

Thick green line – approximate price where you can place Take Profit or manually lock in profits, since further upside above this level is unlikely.

Thin red line – entry price at which you can sell the trading instrument.

Thick red line – approximate price where you can place Take Profit or manually lock in profits, since further downside below this level is unlikely.

MACD indicator. When entering the market, it is important to follow the overbought and oversold zones.

Important. Beginner traders in the Forex market must be very cautious when making entry decisions. It is best to stay out of the market before the release of important fundamental reports to avoid getting caught in sharp price swings. If you decide to trade during news releases, always place stop orders to minimize losses. Without stop orders,, you can quickly lose your entire deposit, especially if you don't use money management and trade large volumes.

Remember that successful trading requires a clear trading plan, like the example above. Spontaneous trading decisions based on the current market situation are inherently a losing strategy for an intraday trader.