GBP/USD Forex Signal: Consolidation Below $1.2338

Strong support is likely at $1.2161.

My last GBP/USD signal on 20^th June was not triggered, as the bearish price action took place a bit higher than the key resistance level at $1.2260.

Today’s GBP/USD Signals

Risk 0.75%.

Trades may only be entered before 5pm London time today.

• Long entry following a bullish price action reversal on the H1 time frame immediately upon the next touch of $1.2161.
• Put the stop loss 1 pip below the local swing low.
• Adjust the stop loss to break even once the trade is 25 pips in profit.
• Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to run.

Short Trade Ideas

• Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of $1.2338 or $1.2386.
• Put the stop loss 1 pip above the local swing high.
• Adjust the stop loss to break even once the trade is 25 pips in profit.
• Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to run.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

GBP/USD Analysis

I wrote in my last forecast on 20^th June that the price was quite evenly balanced between equally spaced support and resistance levels. This plus the fact that it is a Monday with no major news or data releases scheduled, suggested that the price was likely to be very unpredictable and choppy today. I expected it would move only by a little and remain between the nearest key support and resistance levels.

This was a mixed call as I was wrong about the nearest resistance level holding. However, I was correct about there being little, choppy price movement over the course of the day.

The price chart below shows very clearly that the price has continued to make a relatively wide and choppy consolidation between $1.2338 and $1.2161. This has been going on for two weeks which is quite a long time. We will see a breakout eventually and there is more fundamental optimism over the US Dollar than the British Pound so the odds are it will be a bearish breakdown.

I think the levels are likely to hold today and maybe for longer, as it looks like this week will see a quiet Forex market with few major data releases scheduled – we are also getting into the summer period where market action tends to quieten down.

This means that the best trade entry likely to set up today would be either a short trade from $1.2338 or a long trade from $1.2161. I will be happy to take either if there is a suitable reversal printing with a rejection of either key level.

Regarding the USD, there will be a release of CB Consumer Confidence data at 3pm London time. There is nothing of high importance scheduled for today concerning the GBP.