Jumping on GBP/USD’s Uptrend

I’m thinking of entering another long GBP/USD trade!

GBP/USD Daily Forex Chart

GBP/USD Daily Forex Chart

Buying GBP/USD is probably not the best idea coming off my recent attempt at jumping on GBP/USD’s uptrend. Upon reflection though, I have decided that it’s still a good idea to buy the pound against the Greenback and not taking this trade might make me guilty of recency bias.

On a fundamental basis, news of more tightening from the Fed should have pushed the dollar higher across the board. Instead, news of the U.S. yields flattening on the back of low long-term growth and inflation expectations are hitting the markets. Not only that, but comments by BOE member Martin Weale about rising wage growth and the possibility of rate hikes have set the wheels turning (pun intended) for more rate hike speculation from the BOE.

On a technical basis GBP/USD is primed for another bounce higher. The pair has just formed what looks like three white soldiers on the daily chart. It looks even better this time because it’s also near a rising trend line, the 100 SMA, and, as Big Pippin pointed out, a 61.8% Fib retracement. And let’s not ignore that Stochastic is about to leave the oversold area!

I’m thinking of using the U.K. retail sales report as catalyst for this trade. If the report surprises to the upside I could enter a 0.50% position and place my stop loss just below the trend line and my profit targets near its recent highs (1.6800).

Do you think this setup actually has merit or am I just forcing a trade for my long Cable bias?

XOXO,

Huck

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  • Frex

    Hi Huck
    From previous posts and trades you do seem to have a bias towards Gbp rising agajnst the usd. Having said that though the charts do indicate a possible bounce, the stochastic is good, and gbp sentiment the last couple of days has turned
    Usd news points to strength so maybe there will be consolidation before bounce. Anyway, todays figures will be important. Good luck whatever you decide. O’m currently in a eur/gbp short…today will be interesting.

    • Hucklekiwi Pip

      Yep I think we can still enter at a better price on this one. Maybe another trend line retest. I’m also thinking of waiting for upside momentum before I enter. 🙂

  • jobey

    It’s going up and probably could go till reach the 1.68

    • Hucklekiwi Pip

      Awesome! It does look like it’s on its way to 1.68. Do you have any long pound position open? 🙂

  • whenim64

    That does look like a nice confirmation of that Daily trend line. I would still wait for the Weekly candle to close above 1.6650. I think that the pound will need that type of closing price to generate new momentum to go back up to 1.68.

    • Hucklekiwi Pip

      Looks like price is now above 1.6650. I don’t know about the reward-to-risk ratio though. It’s not as attractive as it was last week. I’m thinking if I should just buy when the pair makes new 2014 highs…

      • whenim64

        I have not read about the process that you go through to choose and execute your trades so I cannot say with conviction whether you should or shouldn’t buy if the pair makes new highs.

        What I can say is that there is upside potential for price to move to 1.6750 area. Having said that, I would not begin building a position until price retraces to 1.66 area and closes two daily sessions worth of demand evidence above 1.66. If that happens and there is still at least 50 points of upside potential left, I would enter a small trade and put my stop at 1.6550.

        • Hucklekiwi Pip

          Looks like it’s holding above 1.6600 for now. The BOE is about to release its monetary policy decision though. Best of luck on your setup! 🙂

  • George

    Huck,
    Couldn’t agree more with your analysis. I jumped on this pair at 1.6542 and with a profit target of 1.6791.
    George

    • Hucklekiwi Pip

      Congrats! You’re on your way to your PT! Have you made any adjustments to your stop loss or are you sticking to your original plan until the pair hits the 1.6800 area? 🙂

  • Darcy Buckle

    I think you have missed the opportunity on the daily chart. The 4 hourly and one hourly do offer opportunities though. Both are cycling nicely along the 50 ema – wait for retracement to this ema and enter on price action from there.

    • Hucklekiwi Pip

      Yep I’m beginning to think I’ve missed the opportunity too. Got other swing trade setups that you’re looking at? 🙂

  • whenim64

    I am currently looking at USD/CAD short. I will begin building a short position once USD/CAD retraces up to 1.1150 (1.1200 is even better) and closes 2 daily candles worth of selling evidence. Once this occurs, I will sell one third of my full position size and wait until price closes under 1.1000 to sell more.

    I think that USD/CAD short may be a stronger idea than buying the last leg of the GBP/USD move.

    • Hucklekiwi Pip

      Yikes, USD/CAD is on its way down! Are you planning on building short positions?

      • whenim64

        I was planning on taking this trade however I did not. I decided that it USD/CAD was too close to its 30day low and did not have enough predictable downside potential.

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