Looking to take a shot on GBP/USD as a recent upside recent break looks like the real deal.
Will momentum carry the pair higher or will we see a pull back to potentially play the trend at a better price?
GBP/USD Uptrend Play
Obviously, no one knows what’s next for the pair, but given the environment of massive U.S. stimulus and improving sentiment that we may be past the worst of the coronavirus pandemic, odds are in that the Greenback will get no love in the short-to-medium term.
As far as Sterling, we’re seeing terrible economic data and analyst outlooks from the U.K., but it has been a relative out performer since the middle of March. Can’t really say why that is the case, but I’m guessing it’s due to the Bank of England not coming out with as big of a stimulus bazooka as their counterparts to combat the economic damage from the “Great Lockdown” to stop the spread of COVID-19…at least not yet. Until that time, the British pound has a good chance of out performing the Greenback for now.
With those thoughts in mind, I’m looking to go long GBP/USD, but after a strong move higher after breaking above the strong area of interest around 1.2450, I think a pullback may be in the cards on profit taking since I don’t see fresh catalysts ahead to keep the strong momentum going at the moment.
So, my plan is to put in buy orders at the major psychological levels on the pullback and my stop will be below the next support area around 1.2250. My max target will be the next major psychological handle, which is around two daily ATR from current levels, to giving me a solid starting potential return-on-risk. Here’s what I’m going to do:
Long half position GBP/USD at 1.2500, max stop at 1.2225 with 0.50% risk, max target at 1.3000
Long half position GBP/USD at 1.2400, max stop at 1.2225 with 0.50% risk, max target at 1.3000
I’ll be risking 1.00% of my account if both positions are triggered with a potential 2.76:1 return-on-risk. If the market does go my way, I’ll look to adjust the plan / add to the position to maximize my potential profit and reduce risk. If my trades don’t trigger by the end of this week, I’ll cancel my orders and reassess the idea this weekend.
That’s it for now. Stay tuned for updates and 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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