GBP/USD - Countertrend or Continuation a Trade set-up
The GBP is renown for being difficult to trade. When I first started to trade we were warned against trading this pair until we were competent at trading the EURUSD. When the GBP trends it's a great way to bank the pips if you are on the right side of the trade.
Let's take a look at what's happened recently.
The weekly trend is LONG. The DAILY trend is SHORT. My Bias is LONG.
The previous decline was over 15 days.
How did we know where price would fail- a Weekly Trendline indicated by the blue downward sloping trend line dating back to 22 June 15. Price tested this area twice - patience paid off as the high made on the 17th April took out all the stops above the 1st test 25 Jan. The candles closed under the Weekly Trendline at the same time the EURGBP changed Trend on the daily after terminating at a 61.8% Fib level of the previous move. The weekly support level was another reason for the EUR to gain strength against the GPB. The USD has been unstoppable after a reversal so the GBP agains the USD has been a terrific short trade for the past 3 weeks. The GBP may present the best opportunities in the coming weeks. Mean reversion is when price has moved or extended in a trend over several thousand pips. I can count on price correcting to 50% of the previous move. On the chart you can see that the bulls moved in to add or long at the 38.2% Fib level, however price failed to really move higher and the Bears have now taken us down to a deeper retracement.
When I look at my trade setups for the week I assess the USD and the EURGPB to see where price may terminate or continue.
The daily chart GBPUSD tells me that the move may be over. A fib study tells the story.
Technicals & confluence
- Retracement level and a 50% Fib level (also Orderflow/Support) and mean reversion of the overall trend #1 to #2 =1.3540
- Retracement level 61.8% Fib level #3 to #4 =1.3533
- Extension level 127% Fib ext #5 to #6 = 1.3540
- Extension level 200% Fib ext #7 to #8 (extended past level) -1.3575
To take this trade I will wait for a 1-2-3 pattern.
I am watching for price to close above 1.3590 on the 4HR chart.
Then I will watch for a fib level of 50% of this move on the 1HR and look for price action at 1.3540 and a retest of the broken downward sloping trendline.
My stop will be 1.3500.
I am targeting 1.3710 then 1.3930 as my plan was from a daily chart so I am taking a position but entering on the lower time frames to mitigate my risk.
Let's take a look at what's happened recently.
The weekly trend is LONG. The DAILY trend is SHORT. My Bias is LONG.
The previous decline was over 15 days.
How did we know where price would fail- a Weekly Trendline indicated by the blue downward sloping trend line dating back to 22 June 15. Price tested this area twice - patience paid off as the high made on the 17th April took out all the stops above the 1st test 25 Jan. The candles closed under the Weekly Trendline at the same time the EURGBP changed Trend on the daily after terminating at a 61.8% Fib level of the previous move. The weekly support level was another reason for the EUR to gain strength against the GPB. The USD has been unstoppable after a reversal so the GBP agains the USD has been a terrific short trade for the past 3 weeks. The GBP may present the best opportunities in the coming weeks. Mean reversion is when price has moved or extended in a trend over several thousand pips. I can count on price correcting to 50% of the previous move. On the chart you can see that the bulls moved in to add or long at the 38.2% Fib level, however price failed to really move higher and the Bears have now taken us down to a deeper retracement.
When I look at my trade setups for the week I assess the USD and the EURGPB to see where price may terminate or continue.
The daily chart GBPUSD tells me that the move may be over. A fib study tells the story.
Technicals & confluence
- Retracement level and a 50% Fib level (also Orderflow/Support) and mean reversion of the overall trend #1 to #2 =1.3540
- Retracement level 61.8% Fib level #3 to #4 =1.3533
- Extension level 127% Fib ext #5 to #6 = 1.3540
- Extension level 200% Fib ext #7 to #8 (extended past level) -1.3575
To take this trade I will wait for a 1-2-3 pattern.
I am watching for price to close above 1.3590 on the 4HR chart.
Then I will watch for a fib level of 50% of this move on the 1HR and look for price action at 1.3540 and a retest of the broken downward sloping trendline.
My stop will be 1.3500.
I am targeting 1.3710 then 1.3930 as my plan was from a daily chart so I am taking a position but entering on the lower time frames to mitigate my risk.
Trade active:
We now have a 1-2-3 pattern which signifies a Change of Trend on the 4hr chart. Now I am waiting for a close above 1.3590 .