GBPUSD: Back above 1.2500 but still weak
Yesterday’s signals were not triggered, as the bearish price action took place at 1.2481.
Today’s GBP/USD Signals
Risk 0.75% per trade.
Trades may only be taken between 8am and 5pm London time today.
Long Trade Ideas
Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 1.2495 or 1.2429.
Put the stop loss 1 pip below the local swing low.
Adjust 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 run.
Short Trade Ideas
Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 1.2540, 1.2562, or 1.2587.
Put the stop loss 1 pip above the local swing high.
Adjust 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 20 pips in profit and leave the remainder of the position to run.
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 yesterday that I would like to take a bearish bias below 1.2482, but there was key UK data due soon which could move the price in an unpredictable way. We had a long-term bearish trend and daily closes at multi-month lows, supported by fundamental reasons for a weakness in the British Pound, which are bearish signs.
I was correct to worry about the data releases, as both of them pushed the price up against the long-term bearish trend. The price is now trading above the psychological level and major round number at 1.2500, but the inherent and fundamental weakness in the Pound can be seen by the fact that the rise here against the USD is not as strong as it is in other currency pairs.
This means the picture is unclear here, and that is complicated by the fact there is important U.S. data due later about inflation which is a key driver of the Federal Reserve’s outlook.
I still see the best potential set-ups as short trades, but this may take a while to happen. I have no short-term directional bias.
There is nothing of high importance due today regarding the GBP. Concerning the USD, there will be a release of CPI (Inflation) data at 1:30pm London time today, followed by testimony from the Chair of the Federal Reserve before the Senate at 3pm.