GBP/USD Forex Signal: Consolidation Below $1.2338

Strong support is likely at $1.2161.

My last GBP/USD signal on 20th June was not triggered, as the bearish price action took place a bit higher than the key resistance level at $1.2260.

Today’s GBP/USD Signals

Risk 0.75%.

Trades may only be entered before 5pm London time today.

Long Trade Idea

  • Long entry following a bullish price action reversal on the H1 time frame immediately upon the next touch of $1.2161.
  • Put the stop loss 1 pip below the local swing low.
  • Adjust the stop loss to break even once the trade is 25 pips in profit.
  • Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to run.

Short Trade Ideas

  • Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of $1.2338 or $1.2386.
  • Put the stop loss 1 pip above the local swing high.
  • Adjust the stop loss to break even once the trade is 25 pips in profit.
  • Take off 50% of the position as profit when the price reaches 25 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 in my last forecast on 20th June that the price was quite evenly balanced between equally spaced support and resistance levels. This plus the fact that it is a Monday with no major news or data releases scheduled, suggested that the price was likely to be very unpredictable and choppy today. I expected it would move only by a little and remain between the nearest key support and resistance levels.

This was a mixed call as I was wrong about the nearest resistance level holding. However, I was correct about there being little, choppy price movement over the course of the day.

The price chart below shows very clearly that the price has continued to make a relatively wide and choppy consolidation between $1.2338 and $1.2161. This has been going on for two weeks which is quite a long time. We will see a breakout eventually and there is more fundamental optimism over the US Dollar than the British Pound so the odds are it will be a bearish breakdown.

I think the levels are likely to hold today and maybe for longer, as it looks like this week will see a quiet Forex market with few major data releases scheduled – we are also getting into the summer period where market action tends to quieten down.

This means that the best trade entry likely to set up today would be either a short trade from $1.2338 or a long trade from $1.2161. I will be happy to take either if there is a suitable reversal printing with a rejection of either key level.

GBP/USD

Regarding the USD, there will be a release of CB Consumer Confidence data at 3pm 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.