Last week, we saw no compelling evidence to change our bullish bias on GBPUSD. The market saw otherwise as the pair fell in step with dollar strength following Tuesday’s ISM report, taking out our stop at 1.9850 for a loss of 150 pips.
Recent price action has provided a third point to establish a downward-sloping resistance trend line (see chart below). We have also noted a Shooting Star bearish reversal signal. This has warranted us to change our bias on GBPUSD to bearish in the near term, looking for the pair to move back to triple bottom support near 1.9730. It is important to note that a Shooting Star is typically considered to be a weaker bearish signal, with most trading waiting for the next candle to close bearish for confirmation.
GBP/USD Strategy
1. Short GBPUSD near 1.9970, below trend line resistance and the psychologically important 2.00 level.
2. Set stop-loss above shooting star wick near 2.0060.
3. Set profit target near triple bottom support at 1.9730, risking about 90 pips to gain 240.
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