GBP/USD at 1.5830 Prepares for 2HR Breakout
THE GBP/USD has continued to wind to higher highs through the first three months of 2012. From its low created on January 13th at 1.5232 the pair has moved over 700 pips higher to its 1.5933 peak on February 29th. The GBP/USD 8Hr chart below depicts this move upwards, along with a recent pull back to the standing March low of 1.5696. Today, price has moved off this low and broken an 8HR trendline allowing traders a chance to move to smaller term graphs to find entry’s with the long standing directional move.
Moving from the 4Hr hart we can better see the current swing upward on the GBP/USD. Since the recent low at 1.5696 formed on March 7th the pair has continued along its upward trajectory. Breakout traders will look for the creation of new highs to enter in with the developing 2012 uptrend.
An easy way to trade a breakout during an uptrend is to locate resistance. Below, resistance is found by matching up the wick highs of todays (March 8th) price action. Aggressive traders may choose to enter as soon as a new high is created. A more conservative approach would be to wait for a 2Hr candle close above the current high standing at 1.5830.
My preference is to buy the GBP/USD on a break of resistance near 1.5840. Stops should be set under support near 1.5800. First limit orders should look for a target of 40 pips, at 1.5880, for a clear 1:2 Risk/Reward ratio.
Alternative scenarios include price bouncing off resistance to form new lows.
---Written by Walker England, Trading Instructor
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DailyFX provides forex news on the economic reports and political events that influence the currency market. Learn currency trading with a free practice account and charts from FXCM.
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