We have reached an interesting moment for the GBP/USD currency pair where the bulls have mounted a partially successful and serious fightback against the bears, creating a breakout from the formerly dominant descending price channel and printing a 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, but bulls are failing to push the price above the significant area of resistance confluent with 1.3550.
The GBP/USD currency pair is certainly going to be in the focus of Forex analysts today.
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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 begun to look weaker despite the market pricing in a likely rate hike in just a few days’ time at the next Fed meeting.
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.
Survival of Resistance at 1.3554 Persists
What truly stands out in the short-term price chart just after the London open is the rejection of the area of resistance at 1.3554 with a large hourly engulfing/outside candlestick. Yesterday’s New York session and today’s earlier Asian session were all about bulls trying to push the up to test this level, but it kept topping out every time it got close – the half number at 1.3550 was only first touched in the final hour before the London open, and it triggered quite a strong rejection.
It seems clear that today’s pivotal point is very likely to be the resistance level at 1.3554. If this is broken 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 more failures there, and it essentially holds over the day, then the outlook for bulls will not look good.
The price is heading down quite firmly at the time of writing – if it just keeps going and gets established below 1.3500, that will be a very bearish sign.
GBP/USD H1 Price Chart
My Take on the GBP/USD
I see the best opportunities here that might set up today as a short scalp from a failed test of 1.3554 or a long scalp following a rejection of both 1.3500 and the support level just above it at 1.3504. I will be more confident of the short trade if it sets up. I doubt we will see the price getting established today above 1.3554, despite the recent bullish price action over the past few days.
Review, Support & Resistance Levels
My previous GBP/USD free signal on 1st September was not triggered, but the high of the day was only 2 pips below the resistance level which I had identified at 1.3554.
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 $1.3522, $ 1.3504, or $1.3491.
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 $1.3554, 1.3570, 1.3600.
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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