My previous GBP/USD signal last Tuesday was not triggered, as the bearish price action took place between the likely resistance levels which I had identified that day.
Today’s GBP/USD Signals
Risk 0.75%.
Trades must be taken before 5pm London time today.
Long Trade Idea
- Go long following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.1409.
- 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 Idea
- Go short following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.1496.
- 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 previous forecast last Tuesday that there was a strong bearish case in this currency pair due to the long-term bearish trend which has been in force for many months now, and the fact that there were no obvious support levels for a long way below, meaning the price could fall a long way easily. I also thought that the resistance level at $1.1727 would be a very pivotal point.
I was wrong about $1.1727, with the high of the day well above that level, but right about everything else. The price is now almost 300 pips lower, and the GBP/USD is now trading at its lowest price since the coronavirus panic of March 2020. In fact, the price has only approximately another 50 pips to fall before reaching a new 37-year low. So, the price is already breaking down into blue sky.
We have very strong bearish momentum, with lots of bearish concerns about the future of the British economy and an energy crisis in Europe which is probably also dragging down the Pound. The new UK Prime Minister will be announced today, and Liz Truss is the very strong favourite. The markets prefer Rishi Sunak, the former finance minister, so if he pulls off a shock win, it could help the Pound later today.
A potential factor working against bears might be the symmetrical price channel which is shown within the price chart below. The price is currently touching the lower trend line which might act as support, at least over the short term.
The only other potentially supportive factor is the 37-year low price below at $1.1409 and/or the confluent round number at $1.1400.
I think there are plenty of reasons to be in a short trade in this currency pair now, although we could of course see a strong bullish retracement at any time. A more conservative approach would be to wait for a retracement and reversal at $1.1496.
Concerning the GBP, the new UK Prime Minister will be announced at 12;30pm London time. There is nothing of high importance due today regarding the USD. It is a public holiday in the USA today.
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