Top Regulated Brokers
The GBP/USD currency pair is typically driven more by the US Dollar than by the British Pound, but that may be starting to change as the Pound claims the mantle of a relatively strong currency. It is certainly true today. What are the likely scenarios when the London and New York sessions bring more liquidity into this post-breakout scenario.
Finally, a Test of the Long-Term Range is in Sight
We have reached an exciting moment, because there was strong confluent resistance at the $1.3400 area, but the price has managed to break out above that with firmness and conviction. The price has not been above the big round number at $1.3500 for about two months, so if we have bullishness here that keeps going, an attempt at a two-month high is then just a few pips ahead.
The British Pound is in a position of trading as one of the strongest major currencies. It was strong last week and has again opened well today. The US Dollar Index is falling more decisively, even though markets are still expecting a rate hike by the Fed soon. However, markets seem to have priced that in and are seeing the Dollar as a bit overbought which is helping it fall.
GBP/USD Technical & Fundamental Analysis
The British Pound has a relatively high interest rate, which is probably the main thing keeping it quite strong. The US Dollar does too, and is highly likely to hike even further soon, so both currencies have latent strength. The greenback is a tiny bit stronger fundamentally today after the release of the FOMC meeting minutes.
The breakout above all the former resistance around $1.3400 is a bullish sign. The price now has momentum and room to move higher, which is the line of least resistance, as the price has printed a couple of new support levels on its way higher below $1.3400. Another bullish sign is that we can again fit most of the price action into an ascending linear regression analysis, which makes sense as an influential channel.
I think we can expect the price to rise to test the resistance level at $1.3489, so there is room for day or even swing traders to try long trades. That resistance of course is confluent with a major range boundary and round number at $1.3500, so if the price reaches that level quite quickly, it could be prone for a fast drop from there.
(image09072026gbpusd)
My Take on GBP/USD
I think the price is quite likely to rise to test $1.3489, although that might not happen today. Probably the best approach will be to buy a dip, ideally one that falls to $1.3400 and tests that area of former resistance. If the price reaches $1.3489 / $1.3500 quickly, a short entry from a bearish rejection there could be a great trade, with the price potentially coming back to $1.3400 quickly.
The alternative scenario is if the price breaks below $1.3400. I would avoid trading this currency pair if that happens, because there are a few levels close together so we would probably see choppy price action.
Support & Resistance Levels
My previous GBP/USD signal on 8th July had me looking for something to happen at $1.3400, which was not tested until after yesterday’s London session, so it was not relevant.
Risk 0.75%.
Trades may only be entered prior to 5pm London time today.
Long Trade Ideas
Long entry following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.3402, $1.3379, or $1.3357.
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 Idea
Short entry following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.3489 / $1.3500.
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 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.
There is nothing of high importance scheduled today concerning either the British Pound or the US Dollar
Ready to trade our free Forex signals? Here is our list of the top 10 Forex brokers worth checking out.