We have reached an interesting moment for the GBP/USD currency pair where the bulls have mounted an increasingly successful and serious fightback against the bears, creating a breakout from the formerly dominant descending price channel, rising to a new one-week high, breaking above a seemingly strong resistance level, and printing another major higher low. This could be the start of a resumption of what was a formerly powerful bullish trend that briefly led to a new six-month high, especially now that a key resistance level has been broken.
The GBP/USD currency pair is certainly going to be one of the pairs in the focus of Forex analysts today, despite the dominance of Forex action by the Japanese Yen over the past few days.
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GBP/USD Outlook:
It is worth noting that the British Pound is one of the stronger major currencies over the longer term, and its resumption of strength comes as analysts see the Bank of England as increasingly likely to hike rates and to take a more hawkish approach towards monetary policy.
The US Dollar has continued to weak, despite the market pricing in a likely rate hike in just a few days’ time at the next Fed meeting. It has already traded today at a near three-week low price.
This fundamental and sentimental outlook supports a bullish case in this currency pair.
There is not much in the way of important data releases today, so trading in the Forex market today is likely to be mostly technical. Markets might be a little restrained ahead of key UK and US data releases on Thursday and Friday (mostly Friday)
Resistance at 1.3554 Finally Breaks
What truly stands out in the short-term price chart just after the London open is the bullish breakout through the area of resistance at 1.3554 with the price action accomplishing this just before and after the London open. This can be a very significant time for this currency pair, as liquidity is sometimes concentrated in the UK, and the early London session can set direction. As I expected yesterday, the resistance at 1.3554 held yesterday, but broke today, suggesting bulls have gained more conviction in recent hours.
The next even worth noting is that the next resistance level, which is quite close by at 1.3570, has been touched and rejected just after the breakout. This does not mean much yet, but it does suggest bulls might want to be a little cautious until this hurdle is overcome.
It seems clear that today’s pivotal point is very likely to be what seems to be the new flipped support level at 1.3554. If this holds and the price can hold above it, that will signal that the bullish move is here to stay for at least a while longer. However, if we get a sustained break back below that level, maybe after another failed test of 1.3570, that would be a bearish sign and put the new short-term bullish trend in doubt.
If the price gets established above 1.3570, that will show continuing bullish conviction, suggesting an increase in the power and reliability of the uptrend.
GBP/USD H1 Price Chart
My Take on the GBP/USD
I see the best opportunities here that might set up today as a long trade from a bullish bounce off 1.3554 or a breakout above 1.3570. I will be more confident in a long trade than a short trade. One thing to keep in mind is, it is very possible that we do not see any strong moves in the US Dollar today as there is such high-impact data coming later this week, so I would not be surprised if the price just ranges between about 1.3570 and 1.3550 for the rest of today. If we see a stronger directional move, it will suggest that the market is starting to take a view on what the data will look like.
Review, Support & Resistance Levels
My previous GBP/USD free signal on 8th September could have produced a short trade from the hourly doji candlestick which rejected the resistance level at 1.3554 during the New York session yesterday, but I was not keen on any short trade..
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 $1.3554, $ 1.3530, or $1.3522.
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.
Remove 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 Idea
Short entry following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.3570, $1.3600, or $1.3618.
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.
Remove 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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