GBPUSD: Target Near 1.6050 Surpassed As Downtrend Resumed
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 1.6014 around time of publication today after falling some 60 pips within a 5 minute time frame within the last 30 minutes.
Last time GBPUSD was covered in the Ideas You Can Trade series the upper resistance line of a newly emerged bearish channel (point 1 in white on chart below)was described as a level where the pair could reverse, and combined with the steeper widening bearish channel (point 2 in purple on chart below) where GBPUSD is still caught within.
Since then the pair reversed and continued lower and now just broke the September low that was mentioned as a target in the last post - near 1.6050 - and which appears to form a head and shoulders pattern (when including the high reached after the last low) which just failed literally minutes ago. This breakout means that the pair just got more bearish as support failed and off session lows of 1.6000.
If support is not regained on 1.6050, or if the low of 1.6000 fails to hold - then a bearish continuation should cause GBPUSD to approach 1.5910 where a longer-term bearish support line intersects over the next few days/weeks.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.6051 with a Limit to take profit @ 1.6099 and a stop-loss @ 1.6011 Risk/Reward Summary: Limit risk = +48 pips profit / (-40) Stop-loss risk = Gain to Loss ratio = 1.20
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.5998 with a Limit to take profit @ 1.5971 and a stop-loss @ 1.6020 Risk/Reward Summary: Limit risk = +27 pips profit /(-22) Stop-loss risk = Gain to Loss Ratio = 1.22
Daily Candle Chart: