Forex Setup: Buy GBP/USD For A Long-Term Trade

After weeks of trading USD/CHF, I’m taking another shot at GBP/USD! What do you think of this forex setup?

On the technical side, I’m looking at a possible support at the 1.6200 levels. Not only has the area served as a solid resistance back in 2012, but it’s also currently lining up with a 38.2% Fib on the daily chart. And if that’s not enough to get you excited, Stochastic is also in the oversold territory.

GBP/USD: Daily

GBP/USD: Daily

On the fundamental side, I’m banking on Mark Carney’s recent hints about a rate hike some time in early 2015. In a speech this week, he mentioned that inflation is on its way to the BOE’s 2% target, so the normalizing rates is likely on the table. I’m not yet pulling the trigger on this one though. For one thing, the Scottish independence vote is threatening to crush any significant pound rally. In addition, broad dollar rally is still the name of the game for major currencies these days.

I’ll likely wait until after the Scottish referendum on September 18 before I decide to enter a long trade. I’m willing to initially risk 0.5% of my account with my stop loss just below the 50% Fib. I’ll be aiming for the pair’s previous highs, if not new ones this year.

What do you think of this setup? Is it too soon to call for a pound rally? Let me know what you think! 🙂

XOXO,

Huck

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  • PipsInMaPocket

    Hi Huck,

    Thanks for sharing your potential trade. Personally I would be very wary of going long on Cable at this stage. The price action is well below the 100 and 200 bar MAs and they are both pointing downwards – both of which indicate a bearish bias, trading long term against the trend can be a really tough gig (hard to calculate risk and market sentiment).

    When you’ve put your trade on there are so many elements that will be unsure for you. At present I think that I personally will be sitting this pair out until things stabilise somewhat. It is not worth entering short either as the risk/reward ratio wouldn’t make sense.

    I think that your outlook on the fundamentals makes sense for a rally upwards, but as you say, might be worth just spectating on this occasion. Good luck in whatever you choose and thanks again for the share!

  • PipMaster

    Im going with PipsInMaPocket. The trend is very bearish. Fighting it is suicidal. Quit swimming against the tide Huck.. Jeez 🙂

  • Peter Griffin

    I like the setup. I would wait for a clear reversal candle to form though and like the posters before me, sit tight for now.

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  • aj

    hi huck,
    why don’t you reply to comments?

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