Last Thursday’s signals produced an excellent, profitable long trade following the rejection of the support level identified at 1.3088 by a doji candlestick. This movement went all the way to 1.3226 and would have produced a good profit on a reward-to-risk basis even if closed out at the next resistance level of 1.3178.
Today’s GBP/USD Signals
Risk 0.75% per trade.
Trades must be entered between 8am and 5pm London time today only.
Long Trades
Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 1.3088 or 1.3018.
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.
Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to ride.
Short Trades
Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 1.3178 or 1.3226.
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.
Take off 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
This is still the most interesting of the major Forex pairs, with high volatility but also clean swings in price which are tradable if you can go with the “flow”. I wrote last Thursday that the price really needs to get established above 1.3178 or even 1.3226 before it is possible to be strongly bullish. It looked like this was happening at the end of the week, even with the bearish pullback from 1.3226, as the price broke out. However, over the weekend the British press has published stories suggesting it is likely that the current Prime Minister is likely to face a leadership challenge from within her own party. This is a pretty open-ended threat, but if there is no further news soon, the Pound could be likely to recover. The problem with this threat is that it is not clear whether a replacement Government would be more, or less, inclined towards accepting any deal the European Union might offer to govern post-Brexit trade arrangements, and this variable is the major driver behind the volatility in the Pound.
The best approach is to trade the swings and turns near the key levels and be prepared to go wherever the price takes us. However, keep in mind that there is still a long-term bullish trend, so an upwards movement might have legs in the absence of any further negative British news.
There is nothing important due today concerning either the GBP or the USD.