My previous GBP/USD signal on 29th November was not triggered, as there was no bearish price action when the resistance level which I had identified at $1.2022 was first reached that day.
Today’s GBP/USD Signals
Risk 0.75%.
Trades must be taken between 8am and 5pm London time today only.
Long Trade Ideas
- Go long following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.2237 or $1.2206.
- Place the stop loss 1 pip below the local swing low.
- Move the stop loss to break even once the trade is 25 pips in profit.
- Remove 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to ride.
Short Trade Ideas
- Go short following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.2386, $1.2412, or $1.2437.
- Place the stop loss 1 pip above the local swing high.
- Move the stop loss to break even once the trade is 25 pips in profit.
- Remove 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to ride.
The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.
GBP/USD Analysis
I wrote in my previous forecast for the GBP/USD currency pair on 29th November that the price was likely to fall to test $1.1940 which would hold and then we would see a continuation of bullish price movement. I was only half right – the price never got back to that level but took off that day to rise strongly to new highs. Currently the price is a few hundred pips higher than it was then.
The technical picture is generally bullish. We have seen the price of this pair rise very strongly over the past few weeks after it collapsed to an all-time low due to the appointment of a new British government which was unable to find any credibility in the market regarding its economic policy. The Pound then bounced back after a new government was set up as a replacement, while the US Dollar made a major reversal and has sold off ever since it became clear that the recent rise in inflation has probably peaked.
I remain slightly cautious of the long-term bullish trend here as I prefer to see the 50-day moving average cross above the 100-day moving average, which has not quite happened here yet.
Nevertheless, the price is close to its highest level seen in almost 6 months, which is a bullish sign.
We are seeing firm support levels forming below which is assisting the rise, but we also see selling pressure above from $1.2350 which has produced a descending trend line. The price chart below shows that these narrowing lows and highs have produced a bullish pennant flag continuation chart pattern, which is suggesting that the next major move could be a bullish breakout above $1.2300. Conditions will be ripe for that if the major US CPI (inflation) data release due later today will show a drop to 7.3% as expected or even lower. If even lower, it will be even more likely to happen, as this will likely spark a risk-on rally and a selloff in the US Dollar.
I think trading such a breakout after the CPI data release or going long after a bullish bounce at either of the two nearby support levels which are within the flag, will be the best opportunities which might arrive today.
Concerning the GBP, the Governor of the Bank of England will be giving a press conference about the Financial Stability Report at 3pm London time, followed half an hour later by the release of US CPI (inflation) data.
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