Last Wednesday’s GBP/USD signal was not triggered as the bullish set up from the pin bar bounce t the support level identified at $1.3523 did not complete before the London session ended.
Today’s GBP/USD Signals
Risk 0.75%.
Trades may only be entered before 5pm London time today.
Short Trade Ideas
Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of $1.3473 or $1.3523.
Place the stop loss 1 pip above the local swing high.
Move the stop loss to break even once the trade is 20 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 ride.
Long Trade Ideas
Long entry following a bullish price action reversal on the H1 time frame time frame immediately upon the next touch of $1.3373 or $1.3319.
Place the stop loss 1 pip below the local swing low.
Move the stop loss to break even once the trade is 20 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 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 last Wednesday that the only potential opportunity I saw here would be to trade from a bearish rejection of $1.3606. This was not an exploitable call as the price never got back to that level, but I was on the right track as the price fell sharply the next day, so I was proven correct to be looking to the short side.
The Forex market right now is dominated by long-term strength in the US dollar, which has broken above key resistance to trade at new 1-year highs, and weakness in the euro which is similarly long-term – and both are supported fundamental factors providing a tailwind. Given these factors, it is surprising that the price is holding up here, as you would expect the falling euro to drag down the pound, but this is not the case. The pound has maintained its value against the USD this week, while the euro and yen have fallen strongly against the greenback, suggesting relative strength in the pound exists.
These factors suggest that if the bullish USD trend were to begin reversing, the price could rise notably here. However, a release of key British inflation (CPI) data is due very soon at the time of writing, which will be closely watched by the market as rising inflation is becoming a global economic problem. Annualized inflation is forecast to rise from 3.1% last month to 3.9% this month and the market is already looking to an approaching British rate hike. If inflation comes in significantly above 3.9%, expect the price to spike higher and quite possibly break above $1.3500, at least temporarily.
I think there is scalping potential from reversals at either the nearest support or resistance levels, but I see the greatest medium-term potential as a long trade from support which could then move nicely into profit when the USD finally makes a pullback.
Regarding the GBP, there will be a release of CPI (inflation) data at 7am London time. There is nothing of high importance scheduled today regarding the USD.