Who else is looking at Cable’s downtrend? If you’re like me and you’re looking for an opportunity to buy the dollar against the pound, then this setup is for you!
Earlier today we saw Markit print strong manufacturing and services PMIs for February. Not surprisingly, the reports led to pound strength during the London session.
What makes GBP/USD’s bounce interesting is that it happened around 1.2870. That’s around last week’s low!
The bounce got me looking at GBP/USD’s downtrend on the 4-hour time frame.Now that the pound is getting a breather, it looks like there might be opportunity to jump in on the trend. Between Coronavirus concerns and the U.K.’s GDP coming in flat earlier this month, I don’t see any major catalyst that might reverse Cable’s downtrend.
I’ll be looking for opportunity to enter at the 1.3020 – 1.3040 area near the channel, and SMA resistance levels. A stop just above the channel and a profit target near this week’s lows would yield a good reward-to-risk ratio.
If you’d rather trade the pound’s current upswing and buy GBP/USD instead, then you can still enter at current levels and take profits as soon as the pair consolidates on the lower time frames.
Whichever time frame you wish to trade, make sure you’ve already considered GBP/USD volatility and overall trends in the specific time frame.
What do you think? Will GBP/USD pop back up to the descending channel’s resistance levels? Or should I look at lower points of interest for potential entries?
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