Good evening team,
A couple of nice moves in our direction this morning. We are finally getting the bullish move on the USD and risk off play that we have been anticipating over the past two weeks. Very unlucky with a couple of positions over the past week, EURAUD, AUDJPY and the EURUSD with two close outs at entry. We are now looking at the GBPUSD, from a technical and fundamental perspective, this ticks all of the boxes with a nice risk V reward ratio. This is just highlighting an opportunity that could occur this week.
We have seen a surge into the USD and out of equities, therefore the chances of a corrective risk on rally over night is high. Keep in mind the market moves in waves.
GBPUSD – Daily Charts
We can see a possible topping formation coming into play with the rising wedge/ending diagonal structure. When this structure occurs at the top of a major 5 wave move, it can indicate a reversal opportunity. We are now waiting to enter short positions on this pair.
Elliott wave theory:
GBPUSD – 1 Hour Charts
There are two possible entry points on this position. Firstly, we may see a corrective rally back into the 1.3680-1.3720 area which will provide a nice entry point for a sell position.
Secondly, a break below the 1.3620 will suggest a break down from the rising wedge formation and will provide a second entry position.
We are watching both scenarios closely. We will not be placing any pending orders just yet as we will need to see if the market corrects overnight. However this is going to be a swing trade that we will look to hold for 1-2 weeks once activated. We are expecting a large correction on this pair in the near future. The previous corrective structures have provided over 400 pips in total.
The corrective counter-rally occurred as expected last night. We are now looking to short the GBPUSD with the stop loss above the most recent swing high. As we have USDJPY and USDCHF long positions open we are not looking to use as much leverage on this position. The potential risk V reward is also very good in this position.
Trade Setup: SELL Market execution, current price 1.3720, stop loss 1.3774 and take profit targets at the 1.3480 level.
Stop loss: 54 pips
Take profit: 234 pips
This swing position may take a number of days or a couple of weeks to reach the target zone.