Good evening team,
There are a number of technical patterns I like the look of at the moment, there are head and shoulder formations on the EURUSD, AUDJPY, AUDUSD and EURJPY. You can also see a potential inverted head and shoulders setting up on the USDCAD. When you find numerous currency pairs all suggesting a similar scenario (risk off in this case, USD and JPY strength) it increases the probability of success. This does not mean you should trade all set ups, but choose one and execute well.
Before we move onto a JPY pair the GBPUSD has created a nice set up from a technical perspective.
Tomorrow the UK will report its GDP, Manufacturing production and Industrial Production. The forecast for the GDP is rather large sitting at 5% from a -20.4% the month previous. This provides room for a large miss to the downside on the GDP. Manufacturing production and industrial production also has large forecasts from negative results the month previous. The UK has been in lock down for a long duration due to covid. This is the reason we are looking to sell the cable leading into these data releases tomorrow.
GBPUSD – Technical analysis
There has been a tag of the negative trend, we are looking the trade with the long term trend.
The daily charts has created a number of reversal candles at a major resistance zone, as you can see there has been two candle closes, one being an inverted hammer and the second a dojo candle.
On the 1 hour time frame we have seen an ascending wedge breakout. The 1.2470 zone is an area of interest and might attract buyers as it could be classed as an inverted head and shoulders formation. We are looking to enter a sell position down to that zone.
Trade Setup: SELL Market execution, current price 1.2608, stop loss 1.2712 and take profit left to run however targeting 1.2460.
Stop loss: 104 pips
Take profit: 148 pips
We need to keep our stops wide and use low leverage due to the chop in the market.