GBP/USD Forex Signal: Consolidating Below 1.4200

Adam Lemon

The pair has been ranging for three weeks.

Last Monday’s GBP/USD signals produced a profitable long trade from the bullish engulfing candlestick bounce at the support level of 1.4116.

Today’s GBP/USD Signals

Risk 0.75%.

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

Short Trade Ideas

  • Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of 1.4200, 1.4218, or 1.4240.
  • 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

  • Long entry following a bullish price action reversal on the H1 time frame immediately upon the next touch of 1.4116.
  • 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 Monday that as we have seen the price range in choppy style between a high at about 1.4240 and a low at about 1.4100 for quite a while after a long-term bullish trend, it may be beginning to top out. This suggested that we were likely to eventually see a stronger bearish breakdown below the 1.4100 area ending with a meaningful downwards price movement.

I thought that the support level at 1.4116 could have an effect if reached but was quite likely to break down and get invalidated very easily.

I was wrong about 1.4116 which, as a support level, produced the best long trade opportunity of the day. The jury is still out on whether this multi-week consolidation below 1.4250 is topping out or not.

The technical picture is completely unchanged since Monday, with the price continuing to range between 1.4200 and 1.4100. There is not really any new analysis to add. Probably the most useful thing to keep in mind is that we are seeing consolidations in the USD and all the major Forex currency pairs. There will eventually be a breakout, and this is quite likely to come tomorrow (Thursday) when there will be a release of important U.S. inflation data. However, for today, we are likely to see the price continue to range, so the best opportunities here are likely to be any reversals which might set up at either 1.4200 or 1.4116.

GBP/USD

Concerning the USD, there will be a release of U.S. crude oil inventories data at 3:30pm London time followed by the 10-Year U.S. Treasuries Auction at 6:01pm. There is nothing of high importance scheduled today regarding 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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