Price action on the 60-minute GBPUSD chart shows that since the major drop from last weekend, price remains trading in the range we identified last Monday. Price came within a pip of our lower target and has yet to fill the September 7th gap. Everyone will wait to hear if tomorrow the Fed is as hawkish as some are expecting and what the outcome will be for Thursday’s Scottish referendum vote.
Last week I highlighted the following:
Uncertainty may drive pound a lower in the run up to the vote, but if we see a new poll suggesting a shift to staying back in the U.K. a rally towards 1.6250 may occur.
The playbook has not changed as we are not surprised by most of the recent developments. If the Yes votes win, we may see another slide initially towards 1.5750 and eventually towards 1.5550. If the No votes, a modest rebound may occur that we may look to fade around the 1.6500 area.
Two Big Events for GBP/USD: FOMC and Scottish Independent Vote:
If the No votes win and the Fed does not signal rate hikes happening in the first half of next year, we may see a pound rally towards 1.6450. It is around that area that we may see the formation of a bearish Gartley pattern that trigger a short-term reversal.
The trade: Buy GBP/USD at 1.6250 with a stop loss at 1.6175 and a take profit at 1.6400. The Risk/Reward Ratio is 1:2.
Edward J. Moya