GBP/USD: Moving in wide swings
Last Thursday’s signals produced a profitable short trade from the bearish pin bar which rejected the resistance level identified at 1.2396. This generated a maximum potential profit of 110 pips.
Today’s GBP/USD Signals
Risk 0.75% per trade.
Trades must be entered between 8am and 5pm London time today only.
Short Trade Idea
Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 1.2384.
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 25 pips in profit and leave the remainder of the position to ride.
Long Trade Ideas
Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 1.2252.
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 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 last Thursday that I would be prepared to take a short trade today from a reversal at 1.2396 as I did not see the Bank of England doing enough to get the price established above 1.2396. This was a great and accurate call as it produced a strongly profitable short trade.
The price bounced back from its low and has risen strongly enough to wipe out all the key support and resistance levels between 1.2484 and 1.2252, meaning we seem to be set for a period of consolidation. As the price is moving in large swings and as there is a large space between the nearest support and resistance levels, this consolidation period is likely to be relatively lengthy and the action will probably get messy before it breaks out too.
This means that trading opportunities here may be limited over the next few days. However, it might be that there is minor support at 1.2350 in addition to the key levels.
I would stand aside from trading this currency pair for the time being.
There is nothing of high importance due today concerning either the USD or the GBP.