GBPUSD: Bearish below 1.2106
Yesterday’s signals produced a short trade entry from the bearish pin candlestick on the hourly chart which rejected the resistance level identified at 1.2088. This trade is slightly in profit and the price is moving down slowly, but the trade looks a little fragile and should probably be carefully monitored on lower timeframes.
Today’s GBP/USD Signals
Risk 0.75% per trade.
Trades may only be entered before 5pm London time today.
Long Trade Idea
Long entry following a bullish price action reversal upon the next touch of 1.2000.
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.
Remove 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 Idea
Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of 1.2106.
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.
Remove 50% of the position as profit when the price reaches 20 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 yesterday that there was no doubt that the picture was technically bearish, but there was a question as to whether bears were going to be able to get the price established below 1.2000 – there could well be long-term buyers stepping in here to prop the price up.
I was correct to be cautious, as buyers did step in when the price got close to the big round number at 1.2000. However, the resistance close to 1.2100 held and the price sold off from there again. This suggests to me that we are likely to see another move down towards 1.2000 today. The technical picture suggests this, but we are getting major news releases over the coming hours for both currencies in this Forex pair, which could push the price anywhere.
The best way to trade this pair would probably be to look for longs near 1.2000 and shorts near 1.2100 and to not stay in the trade too long.
There is probably greater medium to long-term potential on the short side rather than the long side.
Regarding the GBP, there will be a release of U.K. Average Earnings Index data at 9:30am London time. Concerning the USD, we will get CPI (inflation) data at 1:30pm.