GBP/USD: British Pound weaker on 20% GDP contraction
Last Thursday’s signals were not triggered as there was no bullish price action when 1.2624 was reached.
Today’s GBP/USD Signals
Risk 0.75% per trade.
Trades must be taken between 8am and 5pm London time today only.
Short Trade Ideas
- Go short following a bearish price action reversal on the 1H1 time frame H1H1H1 time frame immediately upon the next touch of 1.2547 or 1.2670.
- Put 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.
- Remove 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to run.
Long Trade Ideas
- Long entry following a bullish price action reversal on the 1H1 time frame H1H1H1 time frame immediately upon the next touch of 1.2371 or 1.2285.
- Put 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.
- Remove 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 last Thursday that I thought much would depend upon whether the support level at 1.2624 continued to hold. I was ready to take a long trade there or following a sustained breakout above 1.2750. Generally, I was looking to take a long trade.
Looking for a long trade was a bad call, as the price has been falling ever since last Thursday. However, as the price never reached 1.2750 and as there was no bullish bounce at 1.2624, it was enough to stay out of trouble.
The picture is more bearish now, with the price breaking below several support levels and, at the time of writing, failing to break up above the nearest resistance level at 1.2547.
There is no real long-term trend.
There is a wide risk-off sentiment in the financial markets now which will generally push the price of this currency pair down, as the British Pound is seen as a relatively “risky” currency. There are also renewed fears particular to the U.K. with the British economy seen contracting by 20% due to the coronavirus lockdown which is only now being very significantly eased, amid fear that this is still too early and will be likely to produce a damaging second wave of the virus.
Another negative factor for the Pound is recent clarification by the British government that it will not be seeking an extension to the Brexit transition period.
I will take a bearish bias today if we get any bearish reversals at any resistance level identified above.
There is nothing of high importance due today concerning either the GBP or the USD.