GBP/USD Forex Signal: Evenly Balanced

Adam Lemon

Key resistance level at 1.3906 looks likely to be today’s pivotal point.

Last Thursday’s GBP/USD signals could have produced two losing long trades from bullish bounces at two of the three identified support levels which were reached that day.

Today’s GBP/USD Signals

Risk 0.75%.

Trades must be taken before 5pm London time today only.

Short Trade Ideas

  • Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 1.3906, 1.3950, or 1.4010.
  • Put the stop loss 1 pip above the local swing high.
  • Adjust the stop loss to break even once the trade is 20 pips in profit.
  • Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.

Long Trade Ideas

  • Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 1.3893 or 1.3809.
  • Put the stop loss 1 pip below the local swing low.
  • Adjust the stop loss to break even once the trade is 20 pips in profit.
  • Take off 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 last Thursday that this currency pair could be a good short-term buy from a firm bullish bounce rejecting 1.3893 and ideally quickly popping back up above the round number at 1.3900 at the same time, or a good (probably short-term) sell at 1.3950 which seemed to be established as firm resistance.

I was wrong, as despite making bounces at support, the price continued to fall strongly throughout the day without ever getting back to 1.3950.

Unlike EUR/USD and USD/JPY, which are both showing medium-term trends against a weak U.S. dollar, the price action here is more consolidative, ranging between roughly 1.3700 and 1.4000, suitable for range trading.

As such, trades can be taken from either long or short reversals at price extremes with some confidence.

The resistance levels in the price chart below shown at 1.3950 and 1.4010 look especially strong.

The price is currently caught in a small range between two key support and resistance levels. It will probably be best to ignore these levels, or at least wait for a single hourly candle to both reject the new support at 1.3893 and also close well above the resistance level at 1.3906 before entering a long trade, as that could be a decisive bullish move.

GBP/USD

There is nothing of high importance due today concerning either the GBP or the USD.

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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