16.10.202518:06 Forex Analysis & Reviews: GBP/USD: Tips for Beginner Traders on October 16th (U.S. Session)

Trade Analysis and Recommendations for the British Pound

The price test at 1.3408 occurred when the MACD indicator had already moved significantly below the zero line, which limited the pair's downward potential. For that reason, I did not sell the pound. The second test of this level, with the MACD in the oversold zone, triggered Scenario #2 (buy setup), resulting in a rise of more than 40 points in the pair.

Data released by the UK Office for National Statistics indicate fragile yet noticeable economic growth. After a period of stagnation and recession fears, the August figures inspire cautious optimism. The increase in industrial production, in particular, points to a recovery in demand and strengthening of the manufacturing sector. This growth was largely driven by higher output in the automotive and food industries. The impact on the currency market was immediate: the British pound strengthened against the U.S. dollar. Investors, encouraged by signs of at least modest stability in the UK economy, reduced their risk aversion and began shifting assets into pounds.

In the second half of the day, attention will turn to the Philadelphia Fed Manufacturing Index, as well as speeches by FOMC members Christopher Waller and Michael S. Barr. A dovish tone from policymakers could spark another wave of GBP/USD strengthening. A reading above expectations may indicate the resilience of the U.S. economy, while a decline in the index could raise concerns about its future outlook. The impact on the GBP/USD rate will be indirect, driven by changes in risk appetite and expectations regarding further Fed policy.

Equally important will be the speeches of Christopher Waller and Michael S. Barr, members of the Federal Open Market Committee. Markets will carefully analyze their remarks for any signs of a shift in the Fed's stance on interest rates. A soft tone, suggesting readiness to cut rates, would serve as a catalyst for dollar weakness.

As for intraday strategy, I will focus primarily on implementing Scenarios #1 and #2.

Buy Signal

Scenario #1: Today, I plan to buy the pound upon reaching the 1.3442 entry point (green line on the chart), targeting a rise to 1.3489 (thicker green line). Around 1.3489, I plan to exit long positions and open short positions in the opposite direction, expecting a 30–35 point retracement from that level. A strong rise in the pound today is possible as part of the ongoing upward trend.

Important: Before buying, ensure that the MACD indicator is above the zero line and just beginning to rise from it.

Scenario #2: I also plan to buy the pound if there are two consecutive tests of the 1.3419 level, while the MACD is in the oversold zone. This will limit the pair's downward potential and lead to an upward market reversal. Growth toward the 1.3442 and 1.3489 levels can then be expected.

Sell Signal

Scenario #1: Today, I plan to sell the pound after it breaks below 1.3419 (red line on the chart), which should trigger a quick decline in the pair. The key target for sellers will be 1.3371, where I plan to exit shorts and open longs in the opposite direction, aiming for a 20–25 point retracement upward. The pound is unlikely to drop sharply in the second half of the day.

Important: Before selling, make sure that the MACD indicator is below the zero line and just beginning to fall from it.

Scenario #2: I also plan to sell the pound if there are two consecutive tests of the 1.3442 level, while the MACD is in the overbought zone. This will limit the pair's upward potential and lead to a downward market reversal. A decline toward the 1.3419 and 1.3371 levels can be expected.

Chart Legend

• Thin green line – Entry price for buying the instrument
• Thick green line – Suggested Take Profit or manual profit-taking level, as further growth above this level is unlikely
• Thin red line – Entry price for selling the instrument
• Thick red line – Suggested Take Profit or manual profit-taking level, as further decline below this level is unlikely
• MACD indicator – When entering the market, focus on overbought and oversold zones

Important Note for Beginners

Forex beginners should be very careful when deciding when to enter the market. Before the release of major fundamental reports, it's best to stay out of the market to avoid getting caught in sharp price swings. If you decide to trade during news releases, always set stop-loss orders to minimize losses. Without stop-losses, you can quickly lose your entire deposit, especially if you don't use money management and trade large volumes.

Remember: successful trading requires a clear trading plan, like the one presented above. Making spontaneous trading decisions based on the current market situation is an inherently losing strategy for an intraday trader.