GBP/USD has dropped 700 pips in September reaching its Weekly Average Daily Range (ADR) volatility scale.

With the RSI diverting at the lower low and 1.28150 level tested, any signs of bullish candle sentiment may present a great reward to risk ratio long for the GBP/USD.

GBP/USD

Key Points:

  • Price at 50% Fibonacci of last range
  • RSI Divergence at lower low
  • Multi-Month trend line broken – Signaling retail shorts?
  • Extremely important to only enter with BULLISH CANDLESTICK reversal.

 

Key Levels:

Support – 1.28150, 1.27300

Resistance – 1.3000, 200 EMA, 50 EMA, 1.31700, 1.32650, 1.34800

 

Entry Zone:

Optimal entry provides the greatest reward to risk ratio while supporting entry is a zone for reversal signals.

Optimal Entry – 1.28170

Supporting Entry – 1.29000

 

Candle Reversals for entry

  • Bullish Hammer
  • Bullish Engulfing
  • Bullish Piercing

 

The Risk:

As traders, it is your job to mitigate the risk and only trade structures that provide high probability and great reward to risk ratios.

If you are not comfortable with defined exit levels, experiment with Moving Averages to help set solid exit rules to protect your capital.

 

IF: Price breaks below 1.27100– this would suggest the structure is not in our favour and would be wise to reduce exposure or close the trade until a solid signal gives us reasons to re-enter.

 

Reward / Reward Targets:

Optimal Entry 1.28170 – Target 1 1.31700 = 3.5x Reward to Risk

Optimal Entry 1.28170 – Target 2 = 1.32650 4.3x Reward to Risk

Optimal Entry 1.28170 – Target 3 = 1.34800 6.3x Reward to Risk

 

Supporting Entry 1.29000 – Target 1 1.31700 = 1.4x Reward to Risk

Supporting Entry 1.29000 – Target 2 1.32650 = 2x Reward to Risk

Supporting Entry 1.29000 – Target 3 1.34800 = 3x Reward to Risk