The GBP/USD currency pair continues to trade within a range, which has been most notable by its repeated failures over recent days to break above the $1.3637 area. This currency pair usually moves quickly and easily into new price spaces with relatively few genuine retracements, so when it consolidates, traders can get discouraged easily.

This ranging pattern could be about to change, as bullish pressure is evidenced by the higher lows which can be seen in the recent price action over the past week or so.

What makes the USD currency pairs more interesting now is the relative uncertainty over the direction of the US Dollar, although the price action at the end of last week did suggest the Dollar looked heavy and could break to new lows.

With the US Dollar looking uncertain but potentially vulnerable, this solidifies the anticipation of a potentially significant bullish breakout beyond the $1.3637 area. Looking at the price chart below, we can see that this level has been tested three times already. Repeated failures before a successful breakout tends to produce a more powerful breakout, which could generate powerful profits on the long side. However, it is worth noting that there is another key resistance level not far above $1.3637 which bulls would also have to overcome to make strong progress in a long trade.

It is this “coiling” below $1.3637 which is attracting the interest of more traders.

GBP/USD Technical Analysis

The price action is showing higher lows since 4th May but there is a clear line of resistance which is confluent with the round number at $1.3637 and then another one above that at $1.3666. There is no strong long-term trend, which supports the tendency of the price to range, although there is arguably a weak medium-term bullish trend, so I am generally more comfortable looking for a long. These features can be seen in the price chart below.

Trading this pair tends to work better on breakouts than pull backs, because it has such a tendency to make impulsive market movements quite easily – it is less liquid than the EUR/USD, with which it tends to be positively correlated.

The month of May has produced a consolidation with a flat top and a series of higher lows, and the pressure on the sell orders at about $1.3637 looks like it must be increasing.

Even if we do see a bullish breakout above $1.13637, it is not clear how much room the price will have to rise – there is a key resistance levels overhead nearby at $1.3666, although the next one beyond that is 40 pips away which is more meaningful.

(image11052026gbpusd)

Watch Out for Sudden USD Strength

The USA / Iran war and related tensions have been going on for several months, so it is easy to forget about it, especially as President Trump has made so many threats that he did not follow through with. However, with Iran strongly rejecting US deal offers to end the war and insisting on terms which are well beyond President Trump’s red lines.

This means that a return to kinetic war, which would happen very suddenly, is a possibility. Although President Trump tries to make his military moves over weekends when financial markets are closed, sudden news of action, or even an accidental clash or escalation, could send the USD higher as it tends to get a boost as a safe haven in these circumstances.

Could a Short Trade Set Up?

It is usually best in Forex not to take too strong a directional bias. Although I see the best potential opportunity which will be likely to set up today as a long trade above $1.3666, don’t ignore the potential for a final and decisive rejection of the strong area of resistance confluent with the round number at $1.3637. After all, bulls face two resistance levels, and this pair is somewhat less bullish than the EUR/USD, suggesting if you are looking for a long against the USD, the EUR/USD currency pair would be better to trade.

A strong bearish rejection of the $1.3637 area with a large candle showing some impulsive bearish momentum, could be a good signal to go short, especially if that is accompanied by some news about the Iran conflict which points away from a peace agreement in the near term. The price should be able to fall all the way to $1.3580 without encountering any strong support.

My Take on GBP/USD

The thing to watch here today is likely going to be how the price reacts when it reaches $1.3637. This will probably be today’s pivotal point. If it gets established above $1.3666 long trades will likely be good opportunities; if it rejects $1.3637 with a firmly bearish move, a short trade will be an option.

It is a Monday today with zero high-impact economic data releases scheduled, so it might be a relatively slow day without a great deal of directional price movement.

Review, Support & Resistance Levels

My previous GBP/USD signal on 13th April was not triggered.

• Risk 0.75%.
• Trades must be taken before 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 $1.3581, $1.3537, or $1.3512.

• 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 Ideas

• Go short following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.3637, $1.3666, or $1.3707.

• 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.

There is nothing of high importance scheduled today concerning either the British Pound or the US Dollar.

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