Finding Support in a Bearish Channel

The price is looking likely to consolidate over the near term.

My last GBP/USD signal on 4^th July was not triggered, as the bearish price action did not take place at any of my identified key resistance levels.

Today’s GBP/USD Signals

Risk 0.75%.

Trades may only be entered before 5pm London time today.

• Long entry following a bullish price action reversal on the H1 time frame immediately upon the next touch of $1.1934 or $1.1912.
• 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 the descending trend line shown within the price chart below or $1.2097.
• 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.

GBP/USD Analysis

I wrote in my last forecast on 4^th July that the overall picture looked bearish, so it made sense for swing traders to wait for retracements to resistance levels and look to take short trades there at price reversals.

I was correct to look to the short direction, as the day’s major move was downwards, but the turn did not take place at any of my resistance levels.

The price is considerably lower now, but the technical picture is conflicted. The price chart below shows that the movement of the past few days and arguably longer is held by a bearish price channel. However, we have strong support near $1.1900 and a firm higher low near there. Yet whenever the price gets near the top of the channel, it sells off strongly. This suggests that the bears have the upper hand, but strong buyers are still stepping in. We have seen bullish reversals in both the EUR/USD and the GBP/USD currency pair which put the continuation of the strong long-term bearish trends into question.

We have seen major political developments in the UK in recent days with the resignation of Prime Minister Johnson, but they seem to be having little effect upon the Pound.

There is not a lot of room between likely support and resistance, so I think the best approach today will be to try to scalp in either direction after the London open from either support or resistance, whichever is hit first, and monitor the reversal trade on a short time frame and hope for a breakout. Be careful and conservative with profits and be ready to exit, because price movement could be limited and choppy.

Concerning the GBP, the Governor of the Bank of England will be testifying on the stability report before parliament at 3:15pm London time. There is nothing of high importance scheduled today regarding the USD.

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