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GBPUSD is rebounding today following Friday’s break below 1.2110 support.
That area had served as support since the pair tested it on August 1st.
It’s no surprise then to see that today’s high (so far) is 1.2106.
Given that this 1.2100/10 area previously served as support, any retest of it as new resistance is going to attract sellers.
The question is, will it continue to hold or does GBPUSD need to correct higher?
Nobody knows for sure, but the descending channel in the chart below makes me less confident about selling GBPUSD down here.
Channel support near 1.2000 also makes it more difficult to achieve a favorable risk to reward ratio.
For those reasons, I’m not a fan of selling GBPUSD below 1.2110.
I prefer to give the pair some time to see where market participants want to take prices from here.
As I wrote on Sunday, a daily close back above 1.2110 would be bullish. It would also expose channel resistance at or just above 1.2300.
Alternatively, I suspect GBPUSD will continue to find support above 1.2000
And even if the pair breaks below channel support, I won’t sell given that most downside breaks of descending levels become bear traps.
Justin Bennett is an internationally recognized Forex trader with 10+ years of experience. He's been interviewed by Stocks & Commodities Magazine as a featured trader for the month and is mentioned weekly by Forex Factory next to publications from CNN and Bloomberg. Justin created Daily Price Action in 2014 and has since grown the monthly readership to over 100,000 Forex traders and has personally mentored more than 3,000 students.Read more...
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