Tuesday, August 18, 2015

US dollar recoups losses against British Pound

Post news reaction has faded and gbp/usd is retracing after briefly going over 1.5700 level. You may actually see a reversal pattern on 15 minute chart. It is often called an M pattern, which indicates that the move up is stalling and a reversal is taking place. It is most effective if the second top does not reach previous one and the pattern itself does not last longer than 2 hours. In this case it was around 2 hours. 

The selling signal occurred when 12:30 GMT (15 minute) candle closed. You would have opened a short around 1.5689 level (depending on your broker spreads) with a stop loss order at 1.5720. It might be a little bit too big for a day trade, but remember that you can always move your stop when the trade starts working in your favor. 

Take profit could be around 1.5660-1.5650  (50 percent retracement from the peak). Price is slowly approaching the level. At this point one can actually move stop at break even. 

After today’s move we can state that bullish bias has gotten stronger and Pound may finally overcome 1.5700 level tomorrow or by the end of the week. I am waiting for the pair to dip to buy it.

Reversal pattern M on 15 minute chart

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