The GBPUSD has rallied from its strong support zone as visible in this D1 chart. This currency pair has now reached a very strong resistance zone and price action is currently trapped between the lower band of its resistance zone and its 200 DMA. A breakout into its resistance zone is possible and if this currency pair reaches the top of its zone it will also form a double top which is a bearish chart pattern. We expect this currency pair to correct before breaking out of its resistance zone; the correction should form a higher low.
MACD indicates that momentum is fading slightly, but also indicates a bullish centerline crossover which indicated potential future strength. We expect the histogram as well as the moving average to remain in bullish territory during the pending correction. RSI is trading in overbought territory and a breakdown should initiate the sell-off.
We recommend a short position at 1.5675 with a potential second entry level at 1.5900. We also recommend a stop buy order at 1.5750 in order to hedge the initial short position and before adding new short positions to this trade.
Traders who wish to exit this trade at a loss are advised to place their stop loss order at 1.5825. We will not use a stop loss order and execute this trade as recommended. Place your take profit target at 1.5350.
Here are the reasons why we call the GBPUSD currency pair lower
- The GBPUSD has rallied from its support zone and price action is currently trapped between its lower band of its resistance zone as well as its 200 DMA
- MACD indicates that current momentum is fading which makes this currency pair vulnerable for a correction RSI is trading in overbought territory and a breakdown should initiate the sell-off
- A correction is necessary in order to maintain the overall uptrend of this currency pair
- Profit taking after a healthy rally in order to realize profits at strong resistance levels
- New short positions by institutional swing traders