GBP/USD Forex Signal: Consolidation Continues

The bullish momentum from $1.2685 is now testing and threatening to invalidate the resistance level at $1.2764.

My previous GBP/USD signal last Monday was not triggered because there was no bearish price action when the resistance level at $1.2764 was first reached.

Risk 0.75%.

Trades must be entered before 5pm London time today only. 

• Long entry following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.2685 or $1.2640.
• 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 entry following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.2764, $1.2808, or $1.2881.
•  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.

I wrote in my previous forecast for the GBP/USD currency pair that the standout technical feature here was the bullish head and shoulders formation which can be seen in the price chart below, in which the two shoulders are held by the support level at $1.2685, and a neckline confluent with the key resistance level at $1.2808.

I expected these levels to hold, so I thought a long trade from another bullish bounce from $1.2685 or a strong breakout above $1.2808 today would be good signals for new long trades.

Alternatively, a bearish breakdown below $1.2685, or a bearish reversal at $1.2808, should be good short trade entry opportunities.

This was a good call as although we did not get the set up on Monday, the price did make a nice bullish turn yesterday at the support level of $1.2685, and the price has remained well within the range I identified Monday morning ever since.

The bullish momentum from $1.2685 is now testing and threatening to invalidate the resistance level at $1.2764.

I see the situation today as basically unchanged from Monday. The price may continue to rise towards $1.2808 and then make a bearish reversal off that level, or a price area near it, if we get some hourly closes now above $1.2764.

I think that in the absence of any major news driving the market, looking for a long trade from a bullish bounce at $1.2685 or a short trade from a bearish reversal at $1.2808, will be the best approach.

I think a breakout above $1.2808 is unlikely to happen before the US CPI data release due tomorrow, but that could also be an interesting signal for a new long trade.

There is nothing of high importance scheduled today concerning either the GBP or the USD.

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