This pair is likely to be interesting to trade after the FOMC release.
My GBP/USD signal on Tuesday last week produced a short trade from a bearish rejection of the resistance level I had identified t $1.3141, but this only gave about 20 pips profit so would have been a losing trade if taken on the H1 time frame.
Today’s GBP/USD Signals
Trades must be taken before 5pm London time today.
Long entry following a bullish price action reversal on the H1 time frame timeframe immediately upon the next touch of $1.3000.Put the stop loss 1 pip below the local swing low.Adjust the stop loss to break even once the trade is 25 pips in profit.Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to run.
Short Trade Ideas
Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of $1.3141 or $1.3195.Put the stop loss 1 pip above the local swing high.Adjust the stop loss to break even once the trade is 25 pips in profit.Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to run.
The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.
I wrote on Tuesday last week that with the price falling firmly to a new 15-month low, along with the EUR/USD currency pair, it was hard to see an up day: I expected a down day or a period of consolidation, with the best opportunity likely to be a short trade from $1.3141.
This was a good call, as the price made a bearish consolidation capped by the resistance at $1.3141, although the price fell little from there and eventually went on to break above that level temporarily on the next day.
The price then fell again to new 15-month lows but found support on Monday and Tuesday at the psychologically huge round number at $1.3000. The hourly chart below shows this has begun to look like a bullish reversal as we have clearly seen higher highs and higher lows since that level was touched.
Conditions are still in favour of a strong US Dollar, although the currency paused its general advance yesterday, and it is unclear how the market will react to whatever the FOMC does later today. Some analysts think the US Dollar has made a short-term peak and will sell off after the expected rate hike of 0.25% if there are no major surprises. If so, this suggests we may see a meaningful rise from here despite the long-term bearish trend.
I think the best approach today, which probably had low odds of success but a high potential risk reward ratio, would be to look for a long trade close to or at a retracement back to the support level at $1.3000.
Regarding the USD, there will be a release of Retail Sales data at 12:30pm London time, followed by the Federal Funds Rate, FOMC Statement and Projections at 6pm, followed by the usual press conference half an hour later. There is nothing of high importance due today concerning the USD.