My previous GBP/USD signal on 8th January gave a profitable short trade from the resistance level at $1.3449.
Today’s GBP/USD Signals
Risk 0.75%.
Trades may only be entered before 5pm London time Wednesday.
Long Trade Ideas
- Long entry following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.3448, $1.3420, or $1.3391.
- 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.
- Take off 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
- Short entry following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.3486, $1.3503, or $1.3531.
- 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.
- Take off 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.
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GBP/USD Analysis
I wrote in my previous GBP/USD forecast last Thursday that I saw two potential good trade setups here:
- A short trade from a failed test of the resistance level at $1.3449/50.
- A long trade from a bullish bounce at the first touch of $1.3402/00.
Happily, the short trade set up and was nicely profitable. I was wrong about $1.3400 being likely to hold as it actually broke down quite easily.
The price continued to fall for a few days, but we’ve seen a new bullish move from the lows a few days ago which has broken that short-term trend.
The problem for traders now, is that technically, the chart below looks very congested and evenly balanced. This suggests that we are just going to see the price range for a while. This could be useful for scalpers looking for either quick longs or quick shorts from rejections of nearby key levels.
Once the highly important US CPI (inflation) data is released, the market will probably get more unpredictable so I can’t say what will likely happen then. If inflation rises, the price will go down somewhat; if it falls, then price will go up.
One way to trade the data release could be to place limit orders at the support or resistance levels that are quite far away from the current price, which would take advantage of a post-data spike which quickly reverses.
There is nothing of high importance scheduled today regarding the GBP. Concerning the USD, there will be a release of US CPI data at 1:30pm.
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