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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 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 sometime 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 are 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, the 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! 🙂



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