Price has room to fall to $1.1958.

My previous GBP/USD signal last Tuesday could have produced a profitable short trade from the bearish rejection of the resistance level which I had identified at $1.2130, which capped the day’s high price right to the pip.

Today’s GBP/USD Signals

Risk 0.75%.

Trades may only be entered between 8am and 5pm London time Tuesday.

• Long entry following a bullish price action reversal on the H1 time frame immediately upon the next touch of $1.1958 or $1.1926.
• Put the stop loss 1 pip below the local swing low.
• Adjust the stop loss to break even once the trade is 25 pips in profit.
• Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to run.

Short Trade Ideas

• Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of $1.2100 or $1.2170.
• Put the stop loss 1 pip above the local swing high.
• Adjust the stop loss to break even once the trade is 25 pips in profit.
• Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to run.

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.

GBP/USD Analysis

I wrote in my last forecast on 9^th August that we had new lower resistance at the very clearly defined level of $1.2130, which was somewhat confluent with the upper trend line of the price channel.

I thought a short trade from a bearish reversal at that level would likely be the best set up in this currency pair, and that was a good and accurate call.

The price rose in the later section of last week, but we have seen the US Dollar make a recovery so far again this week, making gains against the British Pound yesterday. This downwards price movement looks most likely to continue, as we see a bearish technical situation with the price selling off within descending bearish wedge chart patterns. Even more significantly, there are no key horizontal support levels until $1.1958, so the price has plenty of room to fall further. However, it is possible that the big round number at $1.2000 could be supportive if reached.

The British Pound is relatively weak as the UK economy is widely seen as having a poor outlook, with the Bank of England forecasting peak inflation later this year above 13%, and a recession lasting five quarters.

I would not pay much attention to the trend lines shown in the price chart below, but a bearish reversal from $1.2100 if we get a retracement later could be a good short trade opportunity. Scalpers might find short trades on retracements below that level, as long as the price is above or has cleared $1.2000.

There is nothing of high importance due today regarding either the GBP or the USD.

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There is a likelihood that the pair will have a pullback in the next few days.

Bearish View

• Sell the EUR/USD pair and set a take-profit at 1.0450.
• Add a stop-loss at 1.065.
• Timeline: 1-3 days.

Bullish View

• Set a buy-stop at 1.0600 and a take-profit at 1.0670.
• Add a stop-loss at 1.0525.

The EUR/USD pair tilted upwards as the Federal Reserve testified before Congress. The pair rose to a high of 1.0610, which was the highest point since Friday last week. It has jumped by more than 2% from its lowest point this week.

Jerome Powell on Fed Actions

EUR/USD and American stocks jumped as Jerome Powell testified before a Senate committee. At the same time, bond yields dropped for the second day straight, with the 10-year and 30-year falling to 3.14% and 3.2%, respectively.

In his statement, Powell said that the Fed will continue hiking interest rates until there is evidence that inflation was falling towards its 2% target. At the same time, he lamented that the labor market was extremely hot and that tightening could lead to a recession.

Analysts believe that a recession is inevitable. A poll by the Wall Street Journal showed that the possibility of a recession was 44%. Most of the economists polled cited the rising consumer inflation, low unemployment rate, and the ongoing supply chain challenges.

Still, there are some positives. The price of crude oil has slumped from $124 to less than $110. Natural gas prices have also retreated while the price of some food products have continued falling. Therefore, there is a likelihood that inflation has reached its peak.

The next key driver for the EUR/USD pair will be the testimony by Jerome Powell. Still, historically, the second day of Fed chair’s testimony does not have a major impact on currencies and stocks.

Meanwhile, Markit, a company owned by S&P Global will publish the latest flash manufacturing and services PMI numbers. Analysts expect the data to show that business activity in Europe and the US weakened slightly as inflation surged.

EUR/USD Forecast

The EUR/USD pair continued rising after the latest statement by Jerome Powell. On the four-hour chart, the pair has formed an ascending channel that is shown in purple. It is now along the upper side of this channel. At the same time, the pair has formed an inverted cup and handle pattern. The current rebound is part of the handle pattern.

Therefore, there is a likelihood that the pair will have a pullback in the next few days. If this happens, the next key level to watch will be the lower side of the cup at 1.0365.

There is a likelihood that the pair will have a bearish breakout as bears target the key support at 1.0500.

Bearish View

• Sell the EUR/USD and set a take-profit at 1.0450.
• Add a stop-loss at 1.0625.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 1.0600 and add a take-profit at 1.0650.
• Add a stop-loss at 1.0500.

The EUR/USD is stuck close to the lowest level this year as investors focused on the interest rate decision by the Federal Reserve and the average US jobs data. The pair is trading at 1.0545, which is slightly above last week’s low of 1.0467.

Fed and NFP Data

The EUR/USD pair was in a tight range last week as investors reflected on the mixed events that happened last week. In the first place, data by Markit and the Institute of Supply Management (ISM) showed that the US and EU manufacturing and services sectors were cooling down as inflation continues.

The biggest event last week was the interest rate decision on Wednesday. In its decision, the bank decided to deliver its biggest interest rate hike in more than 20 years. It also hinted that it will continue hiking interest rates in the remaining meetings in a bid to counter the soaring inflation. Precisely, it noted that the neutral rate will be at 3%.

The EUR/USD pair also reacted to the latest American jobs data. The economy added 428k jobs in April while the unemployment rate moved to 3.6%. At the same time, wages held steady above 5% as the labor shortage continued rising.

In response to these jobs numbers, the bond and stock markets continued their sell-off. The 10-year bond yield, which moves inversely to prices, rose to a high of 3.14% while the 30-year rose to 3.2%. The Dow Jones and the Nasdaq 100 fell by more than 0.30%.

The pair will next react to important data from the United States. On Wednesday, the US will publish the latest consumer price index (CPI). Economists expect the data to show that inflation by 8.1% while core CPI rose by 6.1%. These numbers will provide signs that the American inflation has started peaking.

EUR/USD Forecast

The EUR/USD pair continued struggling last week as the market reflected on the latest jobs data and the FOMC decision. On the four-hour chart, the pair has formed a bearish flag pattern and moved below the 25-day and 50-day moving averages. The pair has also moved between the lower and middle lines of the Bollinger Bands.

Therefore, there is a likelihood that the pair will have a bearish breakout as bears target the key support at 1.0500. A move above the key resistance at 1.0600 will invalidate the bearish view.

There is a likelihood that the pair will have a bearish breakout as bears target the key support at 1.0500. 

Bearish View

• Sell the EUR/USD and set a take-profit at 1.0450.
• Add a stop-loss at 1.0625.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 1.0600 and add a take-profit at 1.0650.
• Add a stop-loss at 1.0500.

The EUR/USD is stuck close to the lowest level this year as investors focused on the interest rate decision by the Federal Reserve and the average US jobs data. The pair is trading at 1.0545, which is slightly above last week’s low of 1.0467.

Fed and NFP Data

The EUR/USD pair was in a tight range last week as investors reflected on the mixed events that happened last week. In the first place, data by Markit and the Institute of Supply Management (ISM) showed that the US and EU manufacturing and services sectors were cooling down as inflation continues.

The biggest event last week was the interest rate decision on Wednesday. In its decision, the bank decided to deliver its biggest interest rate hike in more than 20 years. It also hinted that it will continue hiking interest rates in the remaining meetings in a bid to counter the soaring inflation. Precisely, it noted that the neutral rate will be at 3%.

The EUR/USD pair also reacted to the latest American jobs data. The economy added 428k jobs in April while the unemployment rate moved to 3.6%. At the same time, wages held steady above 5% as the labor shortage continued rising.

In response to these jobs numbers, the bond and stock markets continued their sell-off. The 10-year bond yield, which moves inversely to prices, rose to a high of 3.14% while the 30-year rose to 3.2%. The Dow Jones and the Nasdaq 100 fell by more than 0.30%.

The pair will next react to important data from the United States. On Wednesday, the US will publish the latest consumer price index (CPI). Economists expect the data to show that inflation by 8.1% while core CPI rose by 6.1%. These numbers will provide signs that the American inflation has started peaking.

EUR/USD Forecast

The EUR/USD pair continued struggling last week as the market reflected on the latest jobs data and the FOMC decision. On the four-hour chart, the pair has formed a bearish flag pattern and moved below the 25-day and 50-day moving averages. The pair has also moved between the lower and middle lines of the Bollinger Bands.

Therefore, there is a likelihood that the pair will have a bearish breakout as bears target the key support at 1.0500. A move above the key resistance at 1.0600 will invalidate the bearish view.