GBPUSD: Confluence of Support Tested as Pullback Reaches Bullish Support Line
The daily candle chart below shows the price history of the Great British Pound (GBP) versus the United States Dollar (USD). This pair is known as GBPUSD, and trading near 1.6791 around time of publication today after recovering from session low near 1.6757.
That low coincides with the medium term bullish support line (point 4 in green on chart below), as well as the horizontal support line drawn in the last post near 1.6760, which enabled the pair to bounce off that price and return near current levels.
Last time GBPUSD was covered in the Ideas You Can Trade series, earlier this month, resistance had emerged just under 1.7000 which was missed and caused the pair to reverse into a corrective pullback, testing today's support near session lows.
If this low fails to hold, then a bearish continuation would gain momentum, whereas if support continues to build off today's low, and up along the bullish support line mentioned above, then a recovery up a very short term bullish support line (such as point 3 on chart below) could emerge to help GBPUSD regain its uptrend.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.6826 with a Limit to take profit @ 1.6869 and a stop-loss @ 1.6799 Risk/Reward Summary: Limit risk = +43 pips profit / (-27) Stop-loss risk = Gain to Loss ratio = 1.59
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.6753 with a Limit to take profit @ 1.6721 and a stop-loss @ 1.6779 Risk/Reward Summary: Limit risk = +32 pips profit /(-26) Stop-loss risk = Gain to Loss Ratio = 1.23
Daily candle chart: