Which Moving Average To Sell GBP/USD At?
Skerdian Meta • 2 min read
After sitting and watching the paint dry yesterday, today seems to be heading in the same direction. Yet, there are still opportunities to trade these tight ranges.
For now, we´re trying to decide which moving average to use to sell GBP/USD. For starters, I have a bearish bias towards this forex pair; the Bank of England (BOE) turned a bit dovish last Thursday while the markets were expecting some more hawkish comments and possibly an announcement about tightening the monetary policy.
Instead, we received some dovish comments and Chairman Carney followed the same trend. Thus, this pair's near-term fundamental outlook changed.
The USD side looks a lot better now as well. The Buck experienced such a strong downtrend over the last several weeks. Yet, last Friday's US employment and earnings report seems to have turned the tide when it surprised traders with a positive figure. The market had been awaiting more weak earnings numbers after the disappointing numbers we have seen over the last couple of months.
Technically, the pair looks bearish too, but I think I will wait for a retrace higher before selling, until there is a better risk/reward ratio.
In the hourly forex chart above you can see that there are two moving averages above where the price is right now, the 50 SMA (yellow) and the 200 SMA (purple).
The 50 SMA is holding around yesterday's high, 1.3050-60. The 200 SMA is holding about 20 pips higher, which is where the 100 SMA stands on the H4 chart. That places two indicators at each level.
What shall we do?
Trade Idea: Because the USD is going through a selling phase at the moment and we have almost reached the first moving average, we should let the price retrace a bit higher. If the price hesitates there, then the price action will tell us to open a sell forex signal. If not, then we´ll wait for the next moving average above and sell GBP/USD there.