GBPUSD: Prior Resistance Under 1.6821 finally Overcome Today
The daily candle chart below shows the price history of the Great British Pound (GBP) versus the United States Dollar (USD), known as the GBPUSD pair. Today bullish price action pushed the GBPUSD above a resistance line that had been holding prices under its level for the last few weeks when its had been attempted on at least three occasions (within a few pips at least).
This level was discussed in the last post about the GBPUSD in the Ideas You Can Trade series, after 1.6821 was first hit on February 17th, as explained in the last post, and the break above this line now appears to be signaling further bullish momentum with the high today reached near 1.6840.
However, GBPUSD is already off session highs and back under 1.6800 just slightly and trading near 1.6791 around time of publication.
Trend followers may be setting up for long positions above today's high, whereas contrarians expecting a reversal under resistance or in the case of a false breakout (of today's movement) may be looking for an entry slightly lower from current levels, in case a pullback follows.
A Longer term weekly chart shows the history of the GBPUSD going back since 2007, near levels that the pair is currently approaching for the first time since November 2009.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.6849 with a Limit to take profit @ 1.6879 and a stop-loss @ 1.6829 Risk/Reward Summary: Limit risk = +30 pips profit / (-20) Stop-loss risk = Gain to Loss ratio = 1.50
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.6749 with a Limit to take profit @ 1.6711 and a stop-loss @ 1.6771 Risk/Reward Summary: Limit risk = +38 pips profit / (-22) Stop-loss risk = Gain to Loss Ratio = 1.72
Daily candle chart:
Weekly Candle Chart (longer term view):