GBP/USD Forex Signal: Bulls Driving Price Up Past Resistance Levels

The British Pound’s comeback was assisted by the Bank of England restarting its QE program, which has given some backing to the Pound.

My previous GBP/USD signal on 20th September was not triggered, as the bearish price action took place above the resistance level which I had identified at $1.1451.

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 timeframe immediately upon the next touch of $1.0942.
  • 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 timeframe immediately upon the next touch of $1.1271, $1.1350, or $1.1483.
  • 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 previous forecast on 20th September that we were seeing a more bearish technical picture supported by a long-term bearish trend, with the price close to its low, strong resistance at $1.1451, and a bearish trend line suppressing the price. For these reasons, I was comfortable being short of this pair as I expected more downwards movement.

This was an excellent call, as the price continued its descend and finally made a spectacular collapse a few days later to briefly trade at an all-time low below $1.04 when the new UK government announced a program of massive tax cuts to be financed by government borrowing.

Over the last week, the British Pound has made a remarkable reversal, with the price of this currency pair rising by almost one thousand pips! This is a good example of how an asset moving in one direction with a very high level of volatility will often snap right back, with the same high level of volatility.

The British Pound’s comeback was assisted by the Bank of England restarting its QE program, which has given some backing to the Pound.

The bullishness in this currency pair is very strong as this week gets underway. We see the price rising very firmly to break above the resistance level at $1.1217, getting back to a level it last saw on 23rd September.

The price is now facing a resistance level at $1.1271. If it breaks above that, the next resistance level will be at $1.1350.

Despite the bullishness I doubt there will be a good long trade entry opportunity here today, although it is possible that the broken resistance level at $1.1217 might start to act as support.

I think the best opportunity will be likely to be a short trade entry following a decisively failed test of $1.1271 or $1.1350, but profits should be taken conservatively.

GBP/USD

Regarding the USD, there will be a release of US ISM Manufacturing PMI data at 3pm London time. There is nothing of high importance due today concerning the GBP.

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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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