My previous GBP/USD signal on 16th August could have produced a slightly profitable short trade from the bearish rejection of the resistance level which I had identified at $1.2100 if the trade had been closed out at the end of the day’s London session.
Today’s GBP/USD Signals
Risk 0.75%.
Trades must be taken before 5pm London time Thursday.
Long Trade Ideas
- Go long following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.1791 or $1.1695.
- Place 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 ride.
Short Trade Ideas
- Go short following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.1791, $1.1864, or $1.1878.
- Place 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 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 in my last forecast on 16th August that the downwards price movement looked most likely to continue, as we saw a bearish technical situation with the price selling off within descending bearish wedge chart patterns. I thought that a bearish reversal from $1.2100 could be a good short trade opportunity.
This was partially correct – although the level at $1.2100 initially held it was broken later, but the price fell early the next day and is now trading considerably lower.
We saw the GBP/USD currency pair reach its lowest price since the coronavirus panic of March 2020 yesterday, not far above $1.1700, before the price rebounded strongly during the New York session later. However, the key resistance levels at $1.1864 and $1.1878 held, and the price was pushed back down. We also have a medium-term bearish trend line, which is shown within the price chart below, which is helping to suppress the price.
There is a long-term bearish trend, with good fundamental reasons for the strength of the US Dollar (a Fed that is talking about getting tighter with its monetary policy) and the weakness of the British Pound (inflation above 10% and the Bank of England forecasting a five-quarter recession).
I look to trade this pair short, and I see the area from $1.1878 down to the bearish trend line as a good zone in which to enter a short trade after a bearish reversal in price action. In fact, the price can now be contained within a bearish price channel which I have completed in the chart with the lower descending trend line.
If the price does not retrace to that zone but just falls, scalpers might try to be brave and capture a few long pips from a bullish bounce at $1.1791 or $1.1750 below that. The latter is not a key support level, but it does look like the price is taking note of it and reacting when it gets there.
There is nothing of high importance due today regarding either the GBP or the USD.
Ready to trade our free daily Forex trading signals? We’ve shortlisted the best Forex trading brokers in the industry for you.