GBP/USD Signal Update
Yesterday’s signal was not triggered and expired.
Today’s GBP/USD Signal
Risk 0.50%.
Entry must be made before 5pm London time today.
Long Trade
Enter long with a buy limit order at the first touch of 1.6487.
Put a stop loss at 1.6440.
Move the stop loss to break even when the trade is 25 pips in profit. Take off 75% of the position at 1.6540, and leave the remaining 25% to run until Friday’s close for the weekend.
GBP/USD Analysis
Yesterday’s forecast was nicely accurate, as I wrote then: “On the balance of probability, the market will probably take a fall in price down to the 1.6500 area more “naturally” than any rise that might occur before we reach that zone...”
Of course it was the statement from the FOMC yesterday that moved the USD and hence this pair. We fell sharply as low as 1.6507 before getting some kind of bullish bounce this morning. This is not surprising as we are approaching both a key supportive zone that begins at around 1.6500, but also a very significant long-term bullish lower channel trend line which is currently at around the 1.6463 level, and therefore in the process of becoming confluent with the supportive level at 1.6487. This will be a key confluence and whether it holds or breaks will determine whether a lot of traders are going to see the bullish trend as continuing or having ended. After all, this bullish channel has remained intact for five months as the pair made new multi-year highs.
Therefore the story right now is simple: wait until the price falls below 1.6500 and see what happens. It is very likely we will get some kind of bounce, so I will be looking for a long trade down there if it is confirmed by subsequent price action following the first touch of the level. The daily GMT S1 pivot point is also down there, which helps. If we get the touch tomorrow that will probably be even better as by then there should be a more exact confluence between the horizontal level and the trend line.
Like my colleague Christopher Lewis, I am not looking for any short trades just yet.
There are no high-impact economic data releases concerning the EUR due today, however there are for the USD. At 12:30pm London time there is Unemployment Claims and at 2pm there are Existing Home Sales and the Philly Fed Manufacturing Index.