Short-term Trading Idea FX GBP/USD – Bear Speculation: Development On Previous Ideas

Trading opportunities for currency pair: Draghi flipped the dollar pairs. Bull divergence has formed on the daily and there’s a hammer on the weekly. If the sellers don’t manage to make ground this week, the rate will shift back to 1.5310 as part of a correction. The target is 1.4560. There’s no avoiding the correction at the moment. The recoil must be used to open new short positions. Over the short term, make purchases, but don’t wade in with large volumes against the trend.

Background:

After the ECB meeting and NFP came out, I decided to make an addition to the idea I made on 30th November. Last Monday the pound/dollar was trading around 1.5030. Since I relied on the monthly graph in the review, I set the target at 1.4560.

The pound/dollar was down to 1.4849. A scenario where we were to see a fall would have been cancelled out if we’d have seen the weekly candle close above 1.5340. The price didn’t rise above 1.5340, so the target is still on. However, what’s on the horizon has become uncertain.

The pound/dollar restored to 1.5158 on Thursday. The active closing of short positions on the euro and pound was facilitated by the ECB’s decision and Draghi’s press conference. Market participants expected a more aggressive stance with regards to a loosening of monetary policy from the Europeans.

Daily GBP/USD

The pound/dollar has been trading in a sideways since May this year. The Bank of England is in no rush to increase their interest rates, so representatives of the bank haven’t changed their rhetoric and the pound is staying under pressure.

It’s now very difficult to give an assessment of what’s going on. The pound is still in a bear trend. Moreover, the weekly and daily graphs have seen inverted candle patterns form on them. The daily candle for Thursday has closed Wednesday’s candle.

If we make different downward channels, we can see that the risks of a pound strengthening to 1.5380 are up. I don’t think that the pound is set to strengthen sharply, since the euro/pound’s fate rests with the euro bulls (see graph below).