My previous GBP/USD signal on 13th December produced a profitable short trade from the bearish rejection of the resistance level I identified at $1.2437.
Today’s GBP/USD Signals
Risk 0.75%.
Trades may only be entered before 5pm London time today.
Long Trade Ideas
- Long entry following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.2113 or $1.2022.
- Put the stop loss 1 pip below the local swing low.
- Adjust the stop loss to break even once the trade is 25 pips in profit.
- Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to run.
Short Trade Ideas
- Short entry following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.2221 or $1.2343.
- Put the stop loss 1 pip above the local swing high.
- Adjust the stop loss to break even once the trade is 25 pips in profit.
- Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to run.
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 13th December that the technical situation was bullish, with the price chart exhibiting a bullish pennant flag continuation chart pattern, which was suggesting that the next major move could be a bullish breakout above $1.2300.
I thought that trading such a breakout after the CPI data release would be the best opportunity. This was a good call, as the CPI data release did trigger this bullish breakout, which continued to $1.2444, before giving a short trade entry opportunity from the rejection of the key resistance level in that area.
The bullishness is now more subdued, as resurgent risk-off sentiment towards the end of last week pushed the US to make some gains. We have seen a strong USD during the Asian session which has just ended, but it looks here as if the price has bottomed out above the key support level below at $1.2113 so we may be seeing the beginning of a bullish turn.
Both the support level at $1.2113 and the nearby resistance level at $1.2221 look strong and likely to hold at least upon initial tests, so bounces at these levels can be attractive trades for scalpers.
If the price can get established above $1.2221 that will be a bullish sign.
I am prepared to try a long swing trade from any bullish bounce we might get at $1.2113 on the hope that the US Dollar will begin to weaken again.
There is nothing of high importance due today concerning either the GBP or the USD.
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