Today I’m going to show you why I favor GBPUSD shorts below 1.2600.
We’ll discuss key levels to watch and I’ll share exactly how I’m trading the pair next week.
I’ll also share the latest on the US Dollar Index (DXY).
Watch the video below and scroll down for the annotated charts and analysis.
GBPUSD looks increasingly weak at the 1.2620 key level, an area that has held as support since June.
We’ve seen the pound test the level multiple times since then, including today.
Contrary to what many believe, multiple tests of a key level does not necessarily make it stronger.
In fact, it’s often the opposite.
When you combine that with the US Dollar Index (DXY) breaking above the 103.50 key area, GBPUSD looks rather bearish.
I like the idea of looking for shorts here following a sustained break below the 1.2600 region.
However, I’ll only short the pair if we get a retest of 1.2600 as new resistance.
Whether a break and retest materializes is yet to be seen.
Keep in mind, too, that we have some USD event risk on Friday, including Jackson Hole, so expect volatility for pairs like GBPUSD.
Targets for GBPUSD if we get the breakdown include 1.2300 and 1.1840.
Alternatively, a sustained break above 1.2800 would negate the bearish outlook.
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