My previous GBP/USD signal on 6th December was not triggered as the bearish price action took place slightly above the resistance level which I had identified at $1.2635.
Today’s GBP/USD Signals
Risk 0.75%.
Trades may only be entered before 5pm London time today.
Long Trade Ideas
- Go long following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.2653, $1.2616 or $1.2546.
- 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
- Go short following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.2699, $1.2715, or $1.2734.
- 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 for the GBP/USD currency pair two weeks ago that the picture looked bearish, the resistance level confluent with $1.2650 looked especially pivotal and likely to hold, so a short scalp from that area if reached today could be a nice trade. I also thought a bearish breakdown below $1.2571 could be a good short trade entry.
The price never reached $1.2650 and did not fully break below $1.2571 until after London closed, so that was too late.
Two weeks later, the technical picture has become more bullish, after the US Dollar weakened following lower-than-expected US inflation data which has brought forward the anticipated start of rate buts by the Fed from May to March 2024. The Pound has been a beneficiary of this, but this morning UK CPI (inflation) data was released which showed UK inflation has fallen considerably more strongly than expected, from 4.6% to 3.9% when 4.3% was expected. This has led markets to now price in rate cuts in 2024 by the Bank of England of a full percentage point, suggesting a series of 4 cuts of 0.25%. This has led the Pound lower as today’s London session begins.
The price is finding initial short-term support at $1.2653, and this area has been pivotal a few times during the past few weeks. The price action looks too bearish on higher time frames such as the hourly and above to take any long trade, but a long scalp from this area was possible and it remains possible still to maybe enter again.
Beyond that, I think with the news about British inflation, the Pound is likely to remain weak all day, so day traders will probably be best served by looking only for short trades.
It will probably be wise to wait for either a sustained break below $1.2650 before entering short, to see whether this holds up the price, which is unlikely but might happen.
There is nothing of high importance scheduled today concerning either the GBP or the USD.
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