Cable has been trending higher these days as Brexit fears are abating and U.K. data has been improving. I’m looking to go long on a pullback to the rising channel support, and here are the levels I’m watching.
Long GBP/USD Idea
The pair just bounced off the channel resistance at the 1.2775 level and seems ready to test the bottom, which lines up with the Fib levels. In particular, the 61.8% retracement level coincides with a former resistance area, which might hold as a floor moving forward. This is also slightly above the 1.2500 major psychological level and channel support.
Stochastic is heading south for now so sellers are in control of price action while the correction is underway. I haven’t set actual entry orders yet since I plan on watching how price reacts to the Fib levels closer to the mid-channel area of interest to see if buyers are eager to hop back in.
Pound traders are focused on the U.K. Supreme Court hearings on the Brexit plan lately, trying to gauge whether or not the government might still need to secure approval from parliament before invoking Article 50. Last time I checked, PM May agreed to publish the government’s game plan in order to secure the thumbs up from MPs in terms of sticking with their Brexit timeline.
Sterling got knocked down upon hearing the news but the uptrend could remain intact, as No. 10 would likely keep reassuring the general public that they intend to “make the best out of Brexit.” This sentiment should be underscored by the details of their Brexit strategy, which could involve new trade deals with other nations or a compromise to keep the U.K. in the single market.
As for the U.S. dollar, upbeat economic reports don’t seem to be yielding as much gains as it used to since expectations for a Fed rate hike this month have already been priced in. The Greenback might even return some of its recent gains on profit-taking or on remarks indicating that the Fed isn’t likely to tighten again anytime soon.
I’m looking at a potential long position around the 1.2500-1.2550 area with a stop outside the channel and below the 1.2400 mark. I’ll be aiming for the swing high at 1.2775 as my initial profit target for around a 1.67-to-1 R:R.
As always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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