GBP/USD price analysis: buying dips for a counter trend move
GBP/USD price analysis: buying a dip at 1.2535 focusing on 1.2725 offers reasonable risk against reward for a counter trend move
Market highlights of the past week
Friday June 5: in comments after the latest round of UK/EU trade talks, EU chief negotiator Barnier stated that little progress had been made and things could not go on like this for ever
Monday June 8: a spokesman for Prime Minister Johnson stated that the intention is to open non-essential retail outlets from June 15, but the opening would be conditional with restaurants and cafes not opening until July 4
Tuesday June 9: Bank of England deputy governor Cunliffe stated that another sharp re-pricing of risk is still possible and there is likely to be a great deal of pain for the financial sector, but the first stage of the crisis is over
Wednesday June 10: the OECD projected that UK GDP would decline 11.5 per cent for 2020, the worst performance within major economies, with major vulnerabilities due to the dominance of series within the economy
Thursday June 4: there were also underlying concerns over the outlook, especially with EU trade stresses
GBP/USD Price Analysis
Let us have a look at the technical viewpoint:
Monthly: traded to a multi-year low of 1.1410 in March. We have seen choppy trading for the past three months. Resistance 1.2729
Weekly: levels above the 61.8 per cent pullback of 1.2706 (from 1.3515-1.1398) are finding selling interest this week.
Daily: posted an Evening Doji start of the daily chart. This often highlights the end of a trend and the start of a new downward bias. Previous support located at 1.2726, now becomes resistance.
Intraday four-hour: An AB=CD corrective formation completes at 1.2558. We have support located at 1.2541. This is close to the 38.2 per cent pullback level of 1.2531 (from 1.2705-1.2813)
Outlook: the medium-term bias is bearish. However, buying a dip at 1.2535 focusing on 1.2725 offers reasonable risk against reward for a counter trend move
Possible trade set-up:
Action: buying at 1.2535
Stop: 1.2495
Target: 1.2725
Potential return on risk to first target: R3.8 (reward 190 / risk 50)
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