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Forex: Ideas You Can Trade - GBPUSD Resistance Under 1.7000 Tested

Posted by Steven Hatzakis on May 7, 2014 10:01:00 AM

GBPUSD: New Resistance Emerges at 1.6994 as Pair Pauses to Decide Direction

The daily candle chart below shows the price history of the Great British Pound (GBP) versus the United States Dollar (USD), known as GBPUSD, and trading near 1.6962 around time of publication today.

In recent weeks the bullish momentum had enabled GBPUSD to push above the high of April 17th 2014, as discussed in the last post about this pair in the Ideas You Can Trade series

The higher high that since followed reached just under 1.7000 yesterday, where the GBPUSD reversed after reaching 1.6994, since if 1.7000 can be overcome a surge higher would follow, where as if resistance is repeated, then a wider pullback could enable a greater correction where support would be sought below current prices.. While a fresh multi-year high was made yesterday, the 2009 high near 1.7044 has not since been reached, and could be the next place for resistance to be replicated.

Accordingly trend followers may be looking for a bullish continuation, and break above 1.7000 to buy, and contrarian traders expecting a reversal off that line - either already underway or to be repeated. 

Below are examples of how to trade a bullish continuation or a bearish reversal:

1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.7005 with a Limit to take profit @ 1.7038 and a stop-loss @ 1.6981 Risk/Reward Summary: Limit risk = +33 pips profit / (-24) Stop-loss risk = Gain to Loss ratio = 1.37

2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.6910 with a Limit to take profit @ 1.6869 and a stop-loss @ 1.6951 Risk/Reward Summary: Limit risk = +41 pips profit /(-41) Stop-loss risk = Gain to Loss Ratio = 1.00 

Daily candle chart:

gbpusddailymay 7 2014 note
 

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