Leading up to the BoJ interest rate decision this month, the GBP rallied against the USD and the pair formed a top just above the level of $1.278 USD per pound sterling . This provides an opportunity for a reduced-risk shorting opportunity. The outlook on this pair is as the dollar index ( DXY ) is in the progress of making a recovery to the upside, partly due to the hawkish tone of Fed Chair Yellen during the June rate hike.
Meanwhile, there is much uncertainty surrounding the future economy of the UK with sofa data becoming the norm in the past few quarters. The Conservative party and the DUP of Northern Ireland have reportedly struggled to form a coalition/minority backed government, whilst the official Brexit talks with the European Union commence within the next few days. I suspect the market has to a certain extent ‘priced in’ the possibility of a soft brexit, which may have prevented the pound from devaluing too drastically during the 2017 General Election.
This trade will need to be executed quickly, as the price seems to have shot up due to price action in the that was formed after the FOMC rate spike and press conference. The price should not remain at this level for very long and I predict that in the event of a one hour candle close beneath the , this trade may not be able to be executed at this entry level for quite some time due to the outlook on this pair, as well as the strong spanning from approx 1.27594-1.27698. The current price levels provide a perfect entry for a medium term GBPUSD short, with levels such as 1.25 and below a possibility in the coming months.
SL @ 1.28341
TP1 @ 1.27257
TP2 @ 1.24721
TP3 @ 1.26373
If you want to take this trade, you will have to be quick.