My previous GBP/USD signal on 20th January gave a profitable short trade from the resistance level at $1.3486.
Today’s GBP/USD Signals
- Risk 0.75%.
- Trades may only be entered before 5pm London time Friday.
Long Trade Ideas
- Go long following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.3770, $1.3747, or $1.3708.
- 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
- Go short following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.3852, $1.3898, or $1.3950.
- 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.
GBP/USD Analysis
I wrote in my previous GBP/USD forecast nine days ago that we could not rely on technical factors like support and resistance levels as geopolitical developments were driving prices.
Still, I thought short scalps from bounces off resistance levels near $1.3500 could work out, and that was a good call.
Over the past few days, the price has shot higher as the bottom fell out of the US Dollar and several currencies including the British Pound made strong bullish breakouts against it to new long-term highs. The price gained over 300 pips in a few days to reach a new 5-month high price, but the rise has halted over the past couple of days at about $1.3850.
It looks like technical factors are back in the driving seat again, with a very obvious bearish double top rejecting the resistance level at $1.3853, which is confluent with the half-number at $1.3850. However, the second top has not fully finished forming. To complete, we will need a break below $1.3747. This will also be technically significant because the level is confluent with a major quarter-number at $1.3750.
If the price gets established above $1.3852 later, that will be a very bullish sign, as the bearish double top will have failed. I will be happy to enter a long trade if that happens.
If the price breaks down below $1.3747, it could fall further, but I am not very comfortable being long of the US Dollar against the strong bearish trend in the greenback.
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