Top Regulated Brokers
This currency pair is looking more bullish today, with risky assets broadly higher and that includes the British Pound. However, the move higher that we have seen here over the past day is not looking especially strong or convincing, with the price remaining within familiar recent territory.
We have seen key support hold, and this looks significant, but it must be said that key resistance levels remain intact, notably this week’s high price. Volatility and conviction are both low here, but after a long period of indecision, there are some signs that traders might be ready to generate a stronger directional move.
UK Inflation and Improved Risk-On Sentiment Put Pair in Focus
The GBP/USD currency pair may be reaching a decisive moment. Technically, it has been trading within a range for a considerable period, which can indicate a breakout or breakdown is overdue. UK CPI (inflation) data released yesterday was notably lower than expected, which should reduce some hawkish pressure on the Bank of England, and this will tend to allow the Pound to trade a bit lower, or at least remove a “wait and see” barrier, which should generate more movement on the Pound’s side.
British political instability is high, with a strong expectation that the Prime Minister will be forced out and a new leader with an unknown agenda will take over.
Yesterday’s stronger-than-expected earnings data by NVIDIA has given stock markets and even risk assets in general a boost, along with President Trump’s optimism that a deal with Iran will be reached. These factors will tend to send the US Dollar lower.
GBP/USD Technical Analysis
Technically, it makes sense to start with the key support level at $1.3382 that has continued to hold even after hours of the price sitting heavily on it yesterday. This is a bullish sign. Yesterday’s NVIDIA earnings data sent the price sharply higher within an hour or two, sending the price to a new weekly high at $1.3462, before the price gently but progressively sold lower from there. That level has acted as key support recently, so it looks likely to be significant – it comes from the daily chart.
Another bullish factor is the new higher support level which I have drawn at $1.3417, but this is a new and speculative level, and I have little faith in it.
The most recent impulsive wave is bullish. It could be said this pair is in more of a bullish trend than a bearish one over the long term.
Technically, it looks likely that a long trade from a bounce at either of the to nearby support levels could be the best set up today.
Watch Out for Sudden Peace or War
When a war ultimatum is given, you expect a final answer at the last minute – this is the nature of life-or-death negotiations. However, it is possible that President Trump might take this opportunity, if he needs an element of surprise in a military strike, to hit Iran over the next few days when they would least expect it. Trump talking up the prospect of an imminent deal and praising some of the Iranian negotiators could be a decoy.
Another possibility is that the agreement of a peace deal is suddenly announced today.
Either of these surprises could send the price moving strongly higher or lower which could be very uncomfortable for anyone caught in a trade hoping for movement in the other direction. Unfortunately, there is nothing that can be done to mitigate this risk unless you just don’t trade today, apart from making a hedge.
Bears Could Overcome Bulls
I mentioned earlier that technically, a move higher looks more likely to happen next than a meaningful move lower. The line of least resistance looks upwards.
Having said that, the US Dollar is generally firm and has risen over the past few hours. This puts a move higher in doubt or at least suggests a move higher could easily falter again at $1.3463.
A key metric to watch is the support level at $1.3382. If bears manage to push the price through it and the buying that took place just below it over the past day or so, that would be a significant development that would make the picture look more bearish and invalidate the bullish technical signs.
My Take on GBP/USD
This pair continues to consolidate but support and resistance levels are being respected, which offer trading opportunities, even if they might be relatively small. There are signs of strong buying below and this could see another long trade opportunity set up, but there are fundamental factors that could easily trigger lower prices if risk sentiment in the market generally turns sour.
Review, Support & Resistance Levels
My previous GBP/USD signal on 20th May produced a profitable long trade from the support level I had identified at $1.3382.
Risk 0.75%.
Trades must be taken before 5pm London time today only.
Long Trade Ideas
Go long following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.3417, $1.3382, or $1.3347.
Place the stop loss 1 pip below the local swing low.
Move the stop loss to break even once the trade is 25 pips in profit.
Remove 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to ride.
Short Trade Ideas
Go short following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.3463, $1.3500, or $1.3530.
Place the stop loss 1 pip above the local swing high.
Move the stop loss to break even once the trade is 25 pips in profit.
Remove 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to ride.
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.
There is nothing of high importance scheduled today concerning either the British Pound or the US Dollar.
Ready to trade our free Forex signals? Here is our list of the best Forex brokers in the world worth reviewing.