GBPUSD: As Simple as ABCD?

FX:GBPUSD   British Pound / U.S. Dollar
The Cable dropped 240 pips last week and over 600 pips (!) the last 9 days without any fundamental reason I can find related to the UK economy or BoE, apart from some purchasing managers' indices missing their expectation. Last Wednesday the US ADP Non-Farm Employment Change missed expectation, signalling a potential miss of NFP on Friday, which did indeed happen. NFP was a mixed event, with the headline missing expectations, but with upward revisions of prior months and with unemployment falling to the lowest level since 2008.

On the technical side, we see an ABCD reversal pattern coming into a key support level on the daily timeframe . This is a 4 point price structure comprised of three consecutive swings where C is lower than A and the intermediate high after B. D is a new low under the price of B. AB and CD are proportional in both price and time. A high probability trade entry would be to go long at the completion point D. It converges with an oversold RSI , a key support level where price reversed before and a zone between the 500 and 618 retracement of the bullish trend that started last April. The mixed NFP of last Friday might help it push up as well.

The stop would go under the aforementioned 618 retracement which has a nice confluence with the lower trend line of an ascending parallel channel . If price breaks these, the trade becomes invalid. TP1 lies just under the next key resistance level . TP2 lies just under the price level of A. See chart for details. In terms of trade management, when TP1 is hit I would take profit on half of my position and roll my stop loss to breakeven, enjoying a risk free trade towards TP2. As always consult your own trading plan and apply the rules of entry, exit and risk management you normally use and are comfortable with.

There are 750+ pips to be made and the trade has a reward – risk ratio of 7!
You don´t need to be a weatherman to know which way the wind blows - B. Dylan
A favorable UK employment report this morning (with solid average earnings and a lower unemployment rate) strengthened the Pound enough to eventually push the Cable over its first profit target of 330 pips. With the stop moved to BE this trade has now become risk free and is essentially a management of profit. Lets see how far it can reach :)
As I said in prior comments I held on to my long while price was in consolidation. Here is how I see the situation play out on the hourly timeframe, so far so good.
DJC JazzForex
The Bullish Consolidation continued perhaps. 1.54 now offering major support.

Best of luck my online trading buddy! Wish you TP1 and TP2 on this! Ive learned a great deal from your charts and methods of Confluence so thank you Sir!

+1 Reply
Hey thanks, thats very nice of you to say. At its best TradingView is a place where you can learn, share, question and observe to see what works and what doesn't, what make sense and what doesn't, before you try things out for yourself. In the end we are all here to improve our trading skills, I learn from others as well and am glad if someone picks up a thing or two from my charts. Cheers!
+1 Reply
Vincenzo111 JazzForex
Thank you J , cheers
+1 Reply
JazzForex Vincenzo111
Sure thing!
JazzForex mkdeep04
Nice, thank you for sharing that option / idea, I would not complain if it played out :)
Great trade so far Jasper. I took this as a swing trade and have already exited not as much TP was much lower and not actively monitoring the trade. Love your thoughts and keep on pipping!
+1 Reply
JazzForex nick.harrington
Thank you for saying so and congratulation on the pips made. I am still long, aiming for more pips. Lets see how it develops :)
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