It’s been quite a quiet week in the markets with the pairs I tend to trade, which is always a test of patience for us Traders! Plus with NFP falling today – I’m sure most will be holding off entering any USD based pairs until it’s release.
I do have my eyes on Cable (GBPUSD), however, we’ve had nothing but sideways movement pretty much all week. Do we have a turn around in trend on the horizon or is the market prepping for its next leg to the downside? – I definitely won’t be entering any positions until I have confirmation to do so, I’ll break down what I have my eyes on.
The pound has really struggled over the past month to rise up past the 1.27 handle. With price trying multiple times to break through this resistance level and having no luck to close above, and the bears continue to send the pound back down below this level. You can see from the image above how strong this level and proven to be for GBPUSD. Is the market going to continue to the downside? Or are we in the midst of a trend reversal – let’s get closer to the action.
GBPUSD 4 Hour
Extending this descending trendline I’ve had drawn on my charts since March price action continues to react – whether it’s a rejection, a breakthrough or re-test you can clearly see it’s been respected over the past few months. We’re currently seeing consolidation around this trendline once again but we also have some other confluences that could factor into a trend reversal which we can see as we zoom in on the action.
GBPUSD 4 Hour
One factor is a potential Head & Shoulders pattern on the horizon? We haven’t had confirmation quite as of yet but is something I’ll be keeping my eye on moving forward over the coming weeks. As with NFP and state of the UK in general at the moment it’s anyone’s guess where the market’s likely to head next – we could see the price just continue to tumble down towards the previous swing low of 1.25. On the hourly, however – there could be an entry to get in if the NFP release today to help with confirmation to enter – on the 1-hour chart we’ll get a clearer picture of how we could potentially get involved.
GBPUSD 1 Hour
Again, we get a clearer picture of price action reacting to this descending trendline. We also have a bearish wedge that the market has been forming all week and this morning broke through to the underside – only to find this trendline slow the momentum of price action once again! Are we going to see the same occur here? A bullish rejection? Which in turn could send the price up to and fulfil the Head & Shoulders pattern? Or is it just having a rest before continuing to fall? I can imagine, quite a few Traders may have entered a short position after this breakthrough (me personally, I would want to see a pullback and re-test of the underside of the wedge prior to entering a short position). Nevertheless, I’m going to break down how I could trade the market if the dollar was to receive a terrible data release this afternoon.
Upon poor USD data and with further candlestick confirmation around the 1.2554 level. I’d look for an entry to go long – To do so though, I’d need a solid bullish candlestick confirmation after the US news. I’ve drawn in my profit targets to give you an idea of how I’d be looking to enter and exit.
- Profit target 1: (0.382 Fib) 1.262 – resulting in a 1:1 risk/reward
- Profit target 2: (0.6128 Fib) 1.266 – resulting in a 1.75/1 risk reward
Along with having my stop loss placed 5-10 pips below the previous swing low. For now though, I’ll be sitting patiently on the release of USD data today and for the market to confirm an entry before getting on board. As it wouldn’t surprise me with the state of our Great British economy at the moment resulting in the market continuing to tumble down towards the 1.23-25 levels.
As ever I’ll be sure to keep you posted. Thanks for your time today.
Disclaimer: Any statements non-factual in nature constitute only current opinions, which are subject to change. The information presented in this article is not a specific buy or sell recommendation and is presented solely for informational purposes only. Not to be taken as financial advice