On the technical side, we can see the contour of a on the hourly timeframe. Price has comfortably passed the B point and progressed 60% towards the potential reversal zone (PRZ). When defining the PRZ for a , we look at the projection of three levels. I: the of XA, II: an extended AB = CD pattern (in this case 1272 AB = CD) and III: a BC expansion (in this case 2240 BC ). This defines an extremely tight zone, about 5 pips wide, represented by the orange lines in the chart. There is some structure near this zone, which increases the edge of a reversal.
Should the price climb enough to test the PRZ, stabilise and reverse convincingly, I would enter short. SL goes 10 pips behind the next . TP1 = of AD and TP2 = of AD.
There are 85 pips to be made (if this pair follows the script) and the trade has a reward – risk ratio of 3.0!
UPDATE: The hawkish tone of the BoE´s quarterly report resulted in GBP strength and a GU. Price action for this trade candidate overshot X and never gave an entry signal so I did not enter. On to the next trade.