GBP/USD Forex Signal: Topping at 1.4250?

Christopher Lewis

The pair has been ranging for several days.

Last Wednesday’s GBP/USD signals were not triggered, as there was no suitable price action when key levels were reached that day.

Today’s GBP/USD Signals

Risk 0.75%.

Trades may only be taken prior to 5pm London time today.

Short Trade Idea

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

  • Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 1.4116.
  • 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 Wednesday that due to the three new lower “stairstep” resistance printed by the price action over the previous day, it looked like we had strong bearish momentum, which I thought was likely to continue, but I said that I would not want to be short of this currency pair above 1.4125 or ideally 1.4100.

This was a pretty good call, though I should have been firmer about 1.4100 as the price got between 1.4125 and 1.4100 before making a bullish reversal.

The time has come to reassess to longer-term technical picture of this major currency pair. We have seen the price range in choppy style between a high at about 1.4240 and a low at about 1.4100 or maybe a bit lower. This comes after a long-term bullish trend saw the price rise strongly, but it really does look now as if the price is just not going to be able to break above 1.4240 and is topping out. This suggests that we are likely to eventually see a stronger bearish breakdown below the 1.4100 area ending with a meaningful downwards price movement.

I am wary of the lows, so I would not want to go short immediately following a breakdown, but I prefer instead to get short from a bearish reversal at a key resistance level. Currently, the nearest such level is at 1.4200 which looks solid, but we may be seeing a new lower resistance level form at the time of writing at 1.4147.

If 1.4147 holds as resistance and produces a firm bearish rejection during the first two hours or so of the London session, a cautious short trade might be worthwhile here.

The support level at 1.4116 could have an effect if reached, but I see it as quite likely to break down and get invalidated very easily.

GBP/USD

There is nothing of high importance scheduled today regarding either the GBP or the USD.

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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