The GBP/USD currency pair has been weak over the past few days for good reasons. The price broke down and started falling but seems to have found support from the daily chart at the round number below where the price sat at the London open. The question now is what the price might do next.
Today is a Monday with no high-impact data releases scheduled, which is suggestive of a low range, low volatility day. This suggests, but does not confirm, that the price probably will not do very much, but even this information can be useful to traders.
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Stronger Dollar, Uncertain Pound
The GBP/USD currency pair is worth paying attention to right now as it is tending to produce movement and trading opportunities, like most US Dollar pairs. After a long period of consolidation, the US Dollar is showing signs of getting more direction, and increasing volatility, which should give more trading opportunity. More hawkish rhetoric from the Federal Reserve, and higher-than-expected US inflation (CPI) data released last week, have put a bid into the US Dollar. Yet it may need a retracement or at least some time to range, and that is often how this currency pair moves on a Monday.
There is increasing interest in the British Pound as speculation over political instability in the UK reaches a peak, with Prime Minister Starmer’s position looking untenable to most. This raises the question as to who would take over from him, and whether their new government’s policies would be different, and what impact upon the market that would have.
GBP/USD Technical Analysis
The standout feature is the strong fall of the price over the past few days has been halted, at least temporarily, by the support level at $1.3300. This is a round number as well as a support level, which is likely to strengthen it, and it comes from price action on the daily chart, which is another factor which might make it stronger support.
The nearest obvious resistance level, which is shown as a horizontal level in red in the price chart below, is just below the next round number at $1.3400. This confluence is likely to make this resistance stronger, and the fact that it is an obvious level which was recently tested from both above and below also strengthens the case.
The price is in the middle of this range between $1.3300 and $1.3400 and has been rising with some short-term bullish momentum. The bottom just above $1.3300 is very interesting – this is a perfect “rounded bottom” which tends to suggest bullish momentum, and the price did rise from here quite quickly once it got going.
There seems to be minor resistance which is holding the price at the time of writing at about $1.3360.
(image18052026gbpusd)
Watch Out for a Fast Breakout Above $1.3400
While I think the price is set up to range between $1.3300 and $1.3400 today, the perfect rounded bottom above $1.3300 is something that could ruin that scenario. When you see such a nicely rounded bottom or top, which can be part of an even stronger “cup and handle” chart pattern, you often see very fast directional acceleration that can blow right through support or resistance levels, such as what we have here at the $1.3400 area.
The next few hours, we could say the first half of today’s London session, will give further clues as to what might happen next. We see the price pausing after a strong hourly candlestick at about $1.3360, and if this pause continues, the case for a fast bullish rise gets weaker, as there will be nothing to trigger it other than bandwagon jumping and belief in general Forex mean reversion tendency.
Could a Bullish Breakout Above $1.3400 Set Up?
Even if the price pauses at the $1.3400 area after rising to reach it later today, if the rise to that level happens quickly, I will be less likely to see a bearish reversal in that area as probable. Having said that, even if $1.3400 is reached within the next hour or so, I will still wait to see how the price reacts in that area before thinking about a new long trade.
As the price has a lot of room to rise if it gets established above $1.3400, if there is a breakout with two consecutive hourly candlesticks closing above that level, and the second candlestick does not have much of an upper wick, that could be a good point to enter a new long trade.
My Take on GBP/USD
The thing to watch here today is likely going to be how the price reacts when it reaches $1.3400. This will probably be today’s pivotal point. If it gets established above $1.3400, I will not look for a short trade; if it reverses there and respects the level, a short trade will look like the better option to me.
It is likely that today will be dominated by technical factors as there is probably nothing that might happen today to force a change in sentiment or data.
Review, Support & Resistance Levels
My previous GBP/USD signal on 13th May produced a profitable short trade from the bearish rejection of $1.3550.
Risk 0.75%.
Trades may only be entered prior to 5pm London time today.
Long Trade Ideas
Long entry following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.3300, $1.3284, or $1.3252.
Place the stop loss 1 pip below the local swing low.
Move the stop loss to break even once the trade is 25 pips in profit.
Remove 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to ride.
Short Trade Ideas
Go short following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.3394 / $1.3400, $1.3530, or $1.3550.
Place the stop loss 1 pip above the local swing high.
Move the stop loss to break even once the trade is 25 pips in profit.
Remove 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to ride.
The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.
There is nothing of high importance scheduled today concerning either the British Pound or the US Dollar.
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