GBP/USD Forex Signal: Strong Drop

Adam Lemon

The price is trading at a new 8-month low on high volatility.

.Last Wednesday’s GBP/USD signal was not triggered as none of the key levels were reached that day.

Today’s GBP/USD Signals

Risk 0.75%.

Trades must be entered prior to 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 1.3560, 1.3588, or 1.3687.

  • 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 1.3527, 1.3502, or 1.3438.

  • 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 Wednesday that the technical environment was becoming increasingly bearish, but I thought the support level at 1.3588 would hold up for a while. I was looking for short trades at or below 1.3700 on a short-term timeframe with conservative profit targets.

This was a good call as the price moved down over that day, with the day’s high printed just 10 pips below 1.3700.

The technical picture is now even more bearish, with the price printing a very large downwards candle that closed near its low, hitting a new 8-month low price. The size of the daily candlestick was more than twice its average based upon the recent average true range. Typically, such huge daily movements see follow-through over the next day with an extension to a new low, so the odds should be somewhat in favour of more downwards movement today.

I will not take any long trade today. Instead, the best way to enter a short trade will likely be from a bearish reversal at or close to one of the resistance levels I have identified, with 1.3560 as the best candidate. It will be an ideal place for a short trade entry of there is a firm bearish reversal from this level later, ideally during the first half of today’s London session.

GBP/USD

The heads of the Federal Reserve and the Bank of England are both scheduled to take part in a public discussion through the ECB at 4:45pm London time.

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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