GBPUSD: Very Short Term Pullback in Steep Medium Term Bullish Channel
The daily candle chart below shows the price history of the Great British Pound (GBP) versus the United States Dollar (USD) over the medium term and trading currently at 1.6160 (as of publication) today. This currency pair is generally known as GBPUSD. The pair is right near session lows in today’s trading session (of 1.6153 so far) coinciding just near a newly drawn static horizontal support line (point 7 on chart in grey).
The momentum of the current session indicates a pullback or correction in the steep bullish uptrend of the past few weeks since breaking above medium term bearish resistance (point 8 in dark red) and a parallel line just next to it (point 9 in magenta) and since mid-july when support was found near the button of the medium term bullish channel (point 4 in green).
This upper line of this channel (point 4) has been repeatedly provided resistance as the pair attempts to break to its upside despite one false breakout on the 18th of September. If a genuine breakout above this line occurs, static resistance near 1.6337 may exist and the development of a very short term bullish trend line (point 1 in blue) could repeat -pushing the pair even higher (note that the median line of the channel is a dotted blue line as well but not part of point 1).
Since the pair is now trading higher than mid-September, and the curvature of the momentum is quite steep, it appears the GBPUSD looks still bullish and that this pullback may be short lived. If the pullback builds momentum and the pair follows down a short term bearish trend line (such as point 6 in yellow) and target the support line of the medium term bullish channel (point 4).This channel was discussed in a previous article were a steep bullish continuation was noted. From a very long term perspective the GBPUSD also looks bullish in the author's opinion.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.6245 with a Limit to take profit @ 1.5299 and a stop-loss @ 1.6209 Risk/Reward Summary: Limit risk = +54 pips profit / (-36) Stop-loss risk = Gain to Loss ratio = 1.50
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.5644 with a Limit to take profit @ 1.5620 and a stop-loss @ 1.5664 Risk/Reward Summary: Limit risk = +24 pips profit / (-20) Stop-loss risk = Gain to Loss Ratio = 1.20
Daily candle chart: