GBPUSD: Medium Term Bullish Channel Exited Following USD Strength Across Majors
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 1.6035 (as of publication) today. This currency pair known as GBPUSD and is trading lower today following a sharp bearish drop yesterday after opening below the support line of a medium term bullish channel (point 4 in green on chart) in recent trading sessions.
Unless a steep bullish line (such as point 1 in aqua) can develop and enable the pair to regain the medium term bullish channel (point 4), the 23% Fibonacci level near 1.5900 may be targeted and with further support much lower if a steep drop were to follow near the 38.2% and 50% Fibonacci levels (point 7 in gray) near the short term bearish resistance line (point 6 in yellow) close to 1.5600.
Its worth noting that the bullish momentum within the medium term channel (point 4) which had persisted since early July was reversed last week near the 0% Fibonacci level. This was noted as a possible less bullish continuation since the last time the GBPUSD was covered in the Ideas You Can Trade series, and appears to have provided the resistance needed to exit the channel since.
It doesn't appear the pair is ready to change its medium term (bullish) momentum yet, and that this could be a larger pullback precluding a larger subsequent recovery, the likelihood of neither happening imminently and the pair trading range-bound in a sideways market is also probable. Nonetheless, the recent price action of the last 4 sessions has been lower and accordingly (short term) trend followers may expect a continuation, whereas short term contrarians may expect a reversal.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.6149 with a Limit to take profit @ 1.6251 and a stop-loss @ 1.6113 Risk/Reward Summary: Limit risk = +102 pips profit / (-36) Stop-loss risk = Gain to Loss ratio = 2.83
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.5981 with a Limit to take profit @ 1.5916 and a stop-loss @ 1.6029 Risk/Reward Summary: Limit risk = +65 pips profit / (-48) Stop-loss risk = Gain to Loss Ratio = 1.35
Daily candle chart: