If you like trading forex trends like I do, then you’re gonna love this uptrend continuation setup that I spotted on Cable’s daily time frame!
As you can see, GBP/USD has found support just below the 1.4000 major psychological handle. And why not? The level lines up with not only a 50% Fibonacci retracement, but also an ascending channel resistance that was just broken earlier this year. The bright red cherry on top is stochastic almost hitting oversold status.
Fundamentally, I’m all for buying the pound against the dollar. As Pip Diddy discussed yesterday, the BOE thinks its policies could be tightened sooner AND faster if the economy performs as it expects. Talk about optimism!
On the other side of the trade, U.S. equities are having a hard time finding a foothold after the previous days’ losses. Unless there are new catalysts, it might be a while before we see consistent buying demand for U.S. equities (and the dollar funding it).
And then there’s the teeny tiny issue about a government shutdown. While many expect the Senate and Congress to pass a bill that might keep federal funds flowing at least until the mid-term elections, the current brouhaha over the shutdown isn’t doing the Greenback any favors.
For now I’m thinking of buying at current levels and placing my stops just below the 61.8% Fib.
See, GBP/USD has already fallen below its weekly bottom ATR, which could limit its downside moves. I’m aiming for at least the previous highs to get a nice reward-to-risk ratio.
Of course, I’m ready to make adjustments if other catalysts pop up to change the overall theme for the pair.
What do you think? Is this something you would trade for yourself?
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