GBP/USD Forex Signal: Consolidating Below $1.3181

A key pivotal point is likely at $1.3000.

My GBP/USD signal last Wednesday was not triggered as there was no bearish price action when the price first reached the resistance level which I had identified at $1.3163.

Today’s GBP/USD Signals

Risk 0.75%.

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

Long Trade Idea

  • Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of $1.3000.
  • Place the stop loss 1 pip below the local swing low.
  • Move the stop loss to break even once the trade is 25 pips in profit.
  • Remove 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to ride.

Short Trade Ideas

  • Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of $1.3163 or $1.3236.
  • Place the stop loss 1 pip above the local swing high.
  • Move the stop loss to break even once the trade is 25 pips in profit.
  • Remove 50% of the position as profit when the price reaches 25 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 the price was showing a choppy consolidation between $1.3050 and $1.3150. I had thought that if the price hit $1.3163 and made a bearish reversal, it would make an attractive short trade entry.

I was correct about looking for opportunities on the short and not the long side, but I was wrong about the reliability of the resistance level I had identified at $1.3163, as it failed to hold the price and cap the high of the day. The correct level would have been $1.3181, which did act as effective resistance that day and has continued to do so since.

We have seen the price continue to consolidate below $1.3181 over the past week, with more movement on the bearish side as the US Dollar resumes its long-term bullish trend.

The price has now arrived near the half number at $1.3050 which has been informally supportive, although it is not really a key level. This means that we may see a rise from here over the short term, but it is hard to tell.

The big round number and support level below at $1.3000 really stands out as potentially providing a great trading opportunity by acting as a major pivotal point, either mid to long-term from a bullish bounce at $1.3000 if the level holds, or from a short trade if the price can break and get established below $1.3000. This is because there are no support levels close by below $1.3000, so the price could have a lot of room to fall without meeting any supportive obstacles.

Day traders may try to take some long pips from a bounce at $1.3050, but swing or position traders should only look to trade off $1.3000 or $1.3181, neither of which are likely to be reached today, so opportunities here are likely to be limited right now.

GBP/USD

Regarding the USD, there will be a release of the FOMC’s Meeting Minutes at 7pm London time,. There is nothing of high importance scheduled for 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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