GBPUSD: Trend In-between Two Bearish Channel Lines, Next Downside Target Near 1.5420
The daily candle chart below shows the price history of the Great British Pound (GBP) versus the United States Dollar (USD). This currency pair is known as GBPUSD, and is trading near 1.5573 around time of publication today.
Last time GBPUSD was reviewed in Ideas You Can Trade, prices were near similar levels, with a recovery towards 1.5800 in December short-lived. Although GBPUSD has broken above the steeper bearish channel, its still trading between two channels, (the one it broke above which is steeper) and the other less steeper just above. The next downside target could be near 1.5420 where support may be tested.
The trend was bearish earlier this month, and remains much the same despite the failed recovery during December where GBPUSD couldn't break above 1.5800 like it had in November. For a bullish recovery to happen, the bearish channel (above current prices) would need to be regained as well as the longer term bearish support line (the thick red trend line) which could act as resistance.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.5638 with a Limit to take profit @ 1.5770 and a stop-loss @ 1.5574 Risk/Reward Summary: Limit risk = +132 pips profit / (-64) Stop-loss risk = Gain to Loss ratio = 2.06
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.5489 with a Limit to take profit @ 1.5433 and a stop-loss @ 1.5527 Risk/Reward Summary: Limit risk = +56 pips profit /(-38) Stop-loss risk = Gain to Loss Ratio = 1.47
Daily Candle Chart: