GBPUSD: Short term bearish momentum after bull run
The daily candle chart below shows GBPUSD failing to hold onto very short term bullish support (point 1) in the current session trading near 1.5471 (as of publication) after encountering resistance on a medium term bearish line (point 7). It has since (during the past 3 sessions) continued under a developing short term bearish resistance line (point 5-yellow line) with the potential for a steeper bearish continuation to develop (point 4) both similar in slope to previous such lines.
Although the short term momentum is bullish and a breakout of the overall long term bearish momentum may be real, the trend over the medium term appears mixed. It had been noted as mostly bearish in a previous article in mid July where a target of the long term bearish resistance line (point 5) was also noted as a potential continuation. Since the breakout above the long term bearish resistance (point 5- red line), GBPUSD may return back to this line to support a descent – unless the medium term resistance line (point 7) can also be overcome.
If the very short term bullish momentum (point 1) which is consistent with the angle and length of previous very short-term bullish momentum (point 3) can be maintained, the GBPUSD could target near 1.5750 in the short term.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.5520 with a Limit to take profit @ 1.5566 and a stop-loss @ 1.5489 Risk/Reward Summary: Limit risk = +46 pips profit / (-31) Stop-loss risk = Gain to Loss ratio = 1.48
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.5458 with a Limit to take profit @ 1.5401 and a stop-loss @ 1.5501 Risk/Reward Summary: Limit risk = +57 pips profit / (-43) Stop-loss risk = Gain to Loss Ratio = 1.33
daily candle chart: