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The British Pound has become weaker than the Euro over recent days.
My previous GBP/USD signal last Tuesday was not triggered because none of the key support or resistance levels were reached that day.
Risk 0.75%.Trades must be entered prior to 5pm London time today.
- Long entry following a bullish price action reversal on the H1 time frame immediately upon the next touch of $1.3059 or $1.2969.
- 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 time frame immediately upon the next touch of $1.3107 or $1.3181.
- 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.
GBP/USD Analysis
I wrote in my previous forecast for the GBP/USD currency pair that the price would likely rise further, so I was seeking to enter a long trade from a bullish bounce at any of the identified support levels.
I was correct to look to the long side, but unfortunately the price did not retrace to the nearby support level that day to give an entry.
The technical picture has become a little less bullish although the price has risen further over the past week.
The weakness of the US Dollar is not in question – last week’s lower than expected inflation data from the US has lowered expectations of further rate hikes, suggesting we will soon see the end of monetary tightening by the Federal Reserve. On the other hand, the Bank of England still needs to tighten as British inflation remains much worse.
These central bank conditions put this pair in focus, but over the past few days the Pound has become less bullish, while the Euro has taken over the leading role in advancing to new long-term highs against the greenback.
The price chart below shows that the price has got above a short-term descending trend line, but really needs to break up above the resistance level at $1.3107 to really attract buyers and provide renewed bullish momentum.
For this reason, I see $1.3107 as likely to be pivotal today. A short trade from a bearish reversal there would be possible, but I would keep that to a cautious scalp only. The better opportunity will probably be on the long side, if we get two consecutive hourly closes during today’s London session above $1.3107.
Regarding the USD, there will be a release of Retail Sales data at 1:30pm London time. There is nothing of high importance scheduled today concerning the GBP.
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