With volatility looking to pick up for Sterling ahead and likely to create swing opportunities, we thought this rising channel on GBP/USD is one to watch for both the bulls and the bears to check out!
What’s up forex playas! GBP/USD is an interesting candidate for both technical bulls and bears, thanks to a classic consolidation pattern formation currently seen on the four hour chart above.
This pattern comes at the end of a long downtrend, one that started way back in July when GBP/USD traded around the 1.3100, and it’s slightly leaning bullish with a pretty clear higher ‘lows’ pattern.
On the upper end of the spectrum, the tops are a bit messier but also leaning somewhat bullish as well with the latest peak much higher than the last two peaks.
Aside from the price action, volatility levels may continue to rise for this pair with a few major catalysts ahead for Sterling, including the latest U.K. GDP data this week and jobs data next Tuesday. If you’re a swing trader, these can be the sparks for extended moves on GBP/USD or short-term range play opportunities.
So, go out there and do your fundies homework, and once you’re done and you have a bullish lean on future price expectations, there are a couple of setups on the chart above to watch out for before risk managing a long position.
First, waiting for a retest of the bottom of the channel and seeing bullish reversal patterns would potentially be a strong setup. This area is not only where bulls have bought often in October, but it also lines up with Pivot support S1 level and the moving averages, which means higher odds of more buy orders showing up in that area.
But if bulls push the market higher without any further dips, then an upside consolidation break setup should be on your watchlist before considering a long position.
A break above the previous swing high could be the signal that draws in longer-term playas who see a big reversal ahead, or at the very least, longer-term short position holders who may start taking profits.
For those who are leaning bearish, the recent rejection at the top of the channel / 1.2400 major psychological level is a pretty clear signal the bears are back in charge, and could potentially take the pair back to the 1.2100 handle / low end of the range by the end of the week, given the daily average true range of around 90 – 100 pips.
And of course, given the current major trend lower, probably the closet watched bear setup for longer-term players is if the market breaks below the ‘rising channel’ pattern. If so and momentum picks up, that potentially means the start of a big trend lower IF the fundies support a bearish lean.
But what do you think? Is Cable stuck in a range for a while and are you looking for range plays, or do you expect the consolidation to break ahead? What’s your plan if it does?
We’d love to hear from ya so please leave a comment below if you wanna share!