I discussed the GBPUSD twice last week. The first commentary was on Monday shortly after I discovered a 4-hour ascending channel within a larger descending one. The combination offered a way for us to capitalize on strength or weakness.
The second mention came on Thursday as the pound was bouncing from ascending channel support. The bid that formed at 1.3875 helped to confirm the smaller channel which made this future setup that much more attractive.
I also mentioned the GBPUSD again over the weekend along with four other currency pairs. You can view the weekly commentary here.
If last week’s price action didn’t convince you of the favorable technicals, the GBPUSD just sold off from descending channel resistance at 1.4060. As I type this, the pair is on its way to retest ascending channel support for the second time since its inception on February 14.
Upon retesting the 1.4060 area, I opened a small short position at 1.4058. I also announced my entry in the member’s area when prices were hovering around 1.4040.
The pair had already moved more than 100 pips intraday when buyers reached the 1.4060 region, so it was a relatively low-risk entry. Combine the key resistance level and more than favorable risk to reward ratio, and it was worth putting some capital to work.
I will consider adding to the position following a 4-hour close below ascending channel support. That level is currently near 1.3920/30. Key support below that comes in at 1.3600/20.
At this point, I’ve covered my risk. Only a 4-hour close above descending channel resistance near 1.4030/40 would cause me to reverse my short-term bias from bearish to bullish.