GBP/USD Forex Signal: Bearish on Strengthening Resistance

Adam Lemon

The key resistance level at 1.3897 looks likely to be today’s pivotal point.

Last Monday’s GBP/USD signals were not triggered, as the price reversals took place beyond the identified support and resistance levels.

Today’s GBP/USD Signals

Risk 0.75%.

Trades my only be entered between 8am and 5pm London time today.

Short Trade Ideas

  • Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of 1.3897, 1.3925, or 1.3950.
  • Place the stop loss 1 pip above the local swing high.
  • Move the stop loss to break even once the trade is 20 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 ride.

Long Trade Ideas

  • Long entry following a bullish price action reversal on the H1 time frame immediately upon the next touch of 1.3809.
  • Place the stop loss 1 pip below the local swing low.
  • Move the stop loss to break even once the trade is 20 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 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 Monday that it would be best to either wait for a single hourly candle to both reject the new support at 1.3893 and close well above the resistance level at 1.3906 before entering a long trade, as that could be a decisive bullish move, or to look for a short trade from a bearish reversal at 1.3950.

Neither scenario set up and the price mostly traded sideways over the day, so this was at least enough to stay out of trouble.

The technical picture has become more bearish as the second Asian session in a row sees the greenback bid almost everywhere. The weakness is relatively strong in this currency pair as we have seen topping at the strengthening resistance levels at 1.3897 and 1.3950. Both levels still look likely to hold and would be attractive places to enter new short trades from bearish price action reversals, especially 1.3897 as the shallower retracement plus its confluence with the round number at 1.3900.

We look likely to see lower prices here today, although as the FOMC release in the New York session approaches, volatility is likely to shrink.

If the price does not fall much further before the FOMC release, a post-FOMC long from a spike down to the support level at 1.3809 could be a good trade, especially if the spike also hits the confluent round number at 1.3800.

GBP/USD

Regarding the USD, there will be a release of the FOMC Statement and Federal Funds Rate at 7pm, followed by the usual press conference half an hour later. There is nothing of high importance due today concerning the GBP.

Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.
Learn more from Adam in his free lessons at FX Academy

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