Checking out GBP/USD this week as it looks like the recent strong rally higher has run out of steam. Another buying opportunity ahead to play the trend?
GBP/USD Uptrend Pullback
This week, I’m taking a look at the trend higher in GBP/USD, which has been mainly influenced by the broad negative sentiment on the U.S. dollar (massive U.S. monetary policy stimulus, economic outlook concerns due to weak pandemic response).
It looks like the rally has ran out of steam, so will it pull back an give me a chance to play the current bearish dollar themes?
Well, we do have a slew of top tier economic events ahead that could at the very least bring in some volatility to the pair, most notably the monthly round U.S. employment updates coming at the end of the week.
We’ve also got the latest monetary policy statement from the Bank of England out on Thursday that could be a market mover if we get any surprises (e.g., change in interest rates or bond buying program, change in economic outlook, etc.).
Overall, my expectations are for another round of weak U.S. jobs updates (ISM manufacturing still showing employment contraction) which could put pressure on the Greenback once again.
And as far as the BOE statement on Thursday, cautious optimism may be the talk of the day with recent improvements in economic data and sentiment (UK Manufacturing PMI at 53.3 in July) is weighed against another potential COVD-19 lockdown in the the U.K.
So, I’m long biased on GBP/USD for now, and I look to enter on a pullback to the Fibonacci retracement area marked on the chart above. My stop will be below the Fibs and one weekly ATR away, while my initial target will be two times my risk to start. Here’s what I am doing:
Long half position GBP/USD at 1.2960, max stop at 1.2675 with 0.50% risk, initial target at 1.3530
Again, I’ll be risking only 0.50% of my account to start with an initial 2:1 potential R:R. If triggered and going my way, I may add to this position depending on what we see from the BOE and U.S. employment update. If my orders aren’t triggered by the end of Friday, I will cancel my orders ahead of the weekend and re-assess this trade idea.
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.
This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.