- Summary:
- GBPUSD is the weakest among the majors today. However, its technical setups show that it could soon bounce for a potential 3:1 trade.
GBPUSD is off to a bearish start in today’s trading. Among the majors, it is the weakest at -0.27% we start off today’s European session. We can see that on the hourly time frame, the currency pair has failed to find support on the 100 SMA and 200 SMA.
There have been no major economic reports released from the UK since last week. Only the CBI realized sales is scheduled today and the consensus is at at 5. Considered as a third-tier report, I do not expect much movement from GBPUSD when it is released at 11:00 am GMT later today. Instead, I will be keeping an eye on technical levels to determine the direction on GBPUSD.
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On the daily chart, we can see that the currency pair is about to test support at the rising trend line (from connecting the lows of November 11, November 25, December 24, January 14, and January 20).
The weekly chart also reveals that GBPUSD is testing support at the 100 SMA and 200 SMA. Reversal candles on the daily and weekly time frames could indicate that the currency pair may soon rally to its December 2019 highs above the 1.3500 handle. An buy stop order above today’s high around 1.3075 with a stop loss below last week’s lows at 1.2940 and a target at 1.3500 could result to a trade with an RR ratio of over 3:1.
Direction on GBPUSD will be heavily dictated by the upcoming BOE rate decision. According to some reports, there’s a 50-50 chance of the central bank cutting rates on Thursday. A close below last week’s low would invalidate the trade idea and break support at the rising trend line. It could mean that GBPUSD may still fall to its November 8 low at 1.2765 where it could find support at the 100 SMA too.