GBPUSD: Bearish below 1.2106, weak Pound
Yesterday’s signals were not triggered as the price did not quite reach the resistance level identified at 1.2106.
Today’s GBP/USD Signals
Risk 0.75% per trade.
Trades may only be entered before 5pm London time today.
Long Trade Idea
Long entry following a bullish price action reversal on the H1 time frame immediately upon the next touch of 1.2000.
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 Idea
Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of 1.2106.
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 was ready to take a bearish bias on this currency pair if there was a retracement to 1.2106 and a firm bearish reversal there. This didn’t quite happen, with the high of the day printing just a few pips below that level at 1.2100, however the fact that the high was close to that level and the price primarily moved down over the day shows my analysis was basically correct. I was worried that the big round number at 1.2000 would continue to be supportive and we still have not broken it, but a serious breakdown below 1.2000 still looks likely to happen and is supported by the bearish price action on the daily chart. Another bearish factor lies in the fact that the British Pound has the most sustained long-term and short-term weakness of any major currency right now.
There is no reason to change my previous technical analysis, which is essentially bearish below 1.2106 but watch out for support at and close to 1.2000. However, there are high profile data releases due today for both these currencies, which may push the price around in an unpredictable way with high volatility.
I would take a bearish bias if there is a strong bearish reversal later at 1.2106.
Regarding the GBP, there will be a release of Retail Sales data at 9:30am London time. Regarding the USD, there will be releases of Core Retail Sales, Retail Sales, and the Philly Fed Manufacturing Index at 1:30pm.