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GBP/USD Forex Signal: Bearish Retracement

By Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.

GBP/USD: Pound is still relatively strong

Yesterday’s signals were not triggered, as there was no bearish price action at either of the resistance levels which were reached.

Today’s GBP/USD Signals

Risk 0.75% per trade.

Trades may only be taken between 10am and 5pm London time today.

Short Trade Ideas

  • Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 1.3402 or 1.3434.
  • Put 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 run.

Long Trade Ideas

  • Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 1.3311 or 1.3253.
  • Put 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 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 we were seeing a lot of bullish signs and bullish momentum in this currency pair.

I said that I would take a bullish bias here if we had gotten two consecutive hourly closes above 1.3456.

Unfortunately, this did not work out well, as that second close was right at the high of yesterday’s move, and it has been all downhill since then as the Dollar recovered and riskier currencies such as the Pound fell.

However, it is notable that the Pound has fallen by less against the Dollar than most other currencies have. You can see this just by comparing the last day’s action in GBP/USD to EUR/USD. This shows that there is still residual relative strength in the Pound.

This suggests that long trade entries could still be interesting today, and happily, the two support levels we see below the current price (shown in the price chart below) at 1.3311 and 1.3253 look strong. In fact, the level at 1.3253 looks really interesting because it is confluent with a major quarter-number at 1.3250.

For these reasons, I will be happy to take a long trade from a bullish bounce later at either 1.3311 or 1.3253.GBPUSDConcerning the USD, there will be a release of the ADP Non-Farm Employment Change Forecast at 1:15pm London time. Regarding the GBP, the Governor of the Bank of England will be testifying before Parliament at 2pm.

Adam Lemon
About Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.

 

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