GBPUSD: Volatility expected
Last Thursday’s signals produced a break-even short trade following the bearish inside candlestick on the hourly chart which rejected the resistance level identified at 1.2266.
Today’s GBP/USD Signals
Risk 0.75% per trade.
Trades may only be taken between 8am and 5pm London time today.
Long Trade Idea
Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 1.2460.
Place 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
Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 1.2729.
Place 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 was ready to get short of this pair last Thursday as the London session got underway, and this did produce a break-even trade, but then news broke that there was unexpectedly strong progress on a Brexit deal in talks between the U.K. and the E.U. and the British Pound strengthened dramatically. By the end of the day this pair made its strongest price rise in years.
The British Government must act on Brexit by the end of this week and talks are ongoing, so we can expect a lot of volatility in the British Pound. If a deal is agreed and it seems that the numbers are there for it to pass through the British Parliament, we could see the price rise all the way 1.3000 or even higher. Conversely, if any deal falls through and the British government seems able to make a “no deal” Brexit, we will see the price drop like a stone.
In the absence of news, fading extremes upon reversals will probably be a good strategy here.
There is nothing important due today concerning the USD. Regarding the GBP, the Governor of the Bank of England will be testifying before Parliament on the Financial Stability Report at 9:30am London time.