Our take on the pound at the moment

Bolstered by a weaker dollar, the GBP rallied over 200 pips yesterday following a retest of the 1.33 handle as support. At the time of writing, H4 candles are seen lurking just above the 1.34 mark following a sell-off from 1.35. A retest of 1.34 will likely take place today and could potentially act as a suitable platform in which to hunt for long trades. Our rationale behind this approach simply comes down to traders likely looking to fill the large weekend gap up to the 1.36 hurdle. Should this play out, not only are longs possible from 1.34, but shorting from 1.36 is also very interesting. Not only does 1.36 merge with daily resistance at 1.3617 and a weekly resistance area at 1.3501-1.3804, but the H4 approach to 1.36 on the H4 would, as long as buyers come in at 1.34, chalk up a picture-perfect three-drive approach.

Our suggestions: With ‘Brexit’ volatility easing for now, traders may want to consider buying from 1.34, and also selling from 1.36, if price reaches this high. In that this pair remains in the spotlight, our team would not recommend placing pending orders at these levels. Waiting for lower timeframe confirmation, although does not guarantee a winning trade, can avoid unnecessary whipsaws and losses. Confirmation for our team is either a break of a supply/demand followed by a subsequent retest, a trendline break/retest or simply a collection of well-defined buying/selling tails/wicks around the higher timeframe level. Stops are usually placed 5-10 pips beyond confirming structures.