Buy (stop order): 1.6398
Stop loss: 1.6232
Target: 1.6945
Reward to risk ratio: 3.3
The British Pound has been having a pretty awful time since Brexit. However, there have been some big bounces off long term support lines. I have made good money on going long the GBP against both the NZD and the EUR. Below are a few phone screenshots I took at the time - apologies for the quality, wasn't planning on sharing them initially.
Below, the blue arrow shows the price of my average long position (I had multiple). The yellow paperclips are the stops and limit orders I had at the time of this screenshot.
Below, the red arrow shows the price of my short position.
I am now seeing potential for another move in GBP, which may be the start of a long term turnaround, but more likely just a bounce back up to the long term downtrend lines. Regardless, it's an opportunity for us. I see nice set ups against the AUD, EUR and NZD, but here I will just be sharing my set up for GBPAUD.
Firstly, here's a long term, weekly chart for the pair:
A massive head and shoulders pattern formed in 2015-16, breaking lower with the Brexit result. Since then, the GBP has found support multiple times on the green trend line from the 2013 low (circled in green). Last week, prices again tested this trend line and strong support was found with prices closing on the high of the week, and slightly above the most recent downtrend line (in red).
We will now zoom in a bit closer to the daily timescale.
You can see there have been strong reversals on multiple occasions over the past couple of weeks (I count at least four), and Friday's reversal takes us marginally above the recent downtrend line. If prices continue higher on Monday, there is a strong possibility of a thrust to the upside from here. Therefore I am placing a buy stop order above the high of Friday's prices with approx stop and target prices also shown on the chart above (exact order prices are given at the top of this alert).
As I mentioned previously, I also see similar potential for the GBP against the EUR and NZD and will be testing the waters on all three trades.
If the trade entry is triggered, the stop loss will be adjusted as the trade progresses and our position may be closed early based on price action. Please pay attention to your risk management - I recommend not to risk more than 1% of your account per trade.
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