Is GBPUSD Now Going Higher?

The week has barley gotten started and my GBPUSD trade of the week is looking silly after a near 200 pip rally in the pair. There doesn’t seem to be a clear explanation for why the pair pushed aggressively higher; that’s odd.

So has the tide turned? Should we now be looking to get long GBPUSD? I don’t think so, and here’s why.

Looking at the higher timeframes

When you’re trying to understand the overall trend of a currency pair, it’s best to look at the higher timeframes. I define “higher timeframes” as anything from the 4-hour chart and above. So what’s going on from this bird’s eye view?

First, the 4-hour chart seems to be stalling at previous trend line support:

Price was rejected at our previous trend line support.
Price was rejected at our previous trend line support.

But is there something else on this 4-hour chart that looks a bit interesting?

Can you see a potential head and shoulders pattern developing? I know what you’re thinking…

“Nope, there’s no clear neckline.”

And you’d be right. The neckline isn’t clear. But chart patterns in nature are often vastly different than what we see and read about in textbooks. In short, they’re messier and not as easy to spot.

What about now. Can you see it?

The neckline is essentially a horizontal support/resistance area.
The neckline is essentially a horizontal support/resistance area.

Sure gives a different perspective, huh?

Notice how many times that horizontal line capped price as it tried moving higher. After the third attempt, the pair managed to break through. And then you see a dip lower that didn’t quite touch our line, but I still consider that a valid test of support.

Well, we’ve now tested that support line again and jumped back higher. But will it last?

What’s the daily chart show?

When we look at the daily chart, today’s big move higher really doesn’t do anything to change the big picture:

GBPUSD is still in an obvious downtrend on the daily chart.
GBPUSD is still in an obvious downtrend on the daily chart.

Notice how price is still below the 50-day SMA and all three SMA’s are pointing lower. This is an obvious downtrend, and I always like being on the side of the trend.

So what now?

I was stopped out of my short position last night, and I’m glad I was. I wouldn’t have wanted to suffer 200 pips of drawdown. But I’m now short again from 1.2496 with a stop lose above the 50-day SMA which currently comes in at 1.2562.

I like the risk reward from these levels if you’re ok being patient. If the trend continues lower, we should be bagging plenty of pips to make up for the lose we took on this morning’s spike.

Geppy Forex

I began trading forex in 2005. It took me seven years to figure out how to be consistently profitable. I blog in an effort to hopefully help other aspiring traders become successful much sooner than I did.

2 thoughts on “Is GBPUSD Now Going Higher?

  1. Great one, Geppy!

    We, I especially, really missed your previous daily presence here.
    Following your previous post on the 19th, i have the same S&R levels spelt out on my chart. Infact, your entry price is sitting right on my 50-Fib level as it has received a couple of failed hits coming from last week. This is surely an entry level we can count on and really hoping the swing begins soon enough to start recording some green pips.
    But anyway, good to have you back again and many congrats on Kibin’s progress too, I was part of it ‘coz i believe in you.
    Well-done Champ!!

    1. Thanks, qiingxleey. First, awesome to have you onboard with Kibin. It’s been a grind, but things have never been better. Great time to be coming in as an investor, so good on you!

      GBPUSD is looking great today. It seems 1.2300 will be the line in the sand and I’m hoping we see it break this week. Although that could be tough with Thanksgiving coming up. We’ll see, but glad you’re seeing it as I am.

Leave a Reply

Your email address will not be published. Required fields are marked *