Last week’s anti-dollar sentiment and relatively upbeat data from the U.K. has triggered a bounce from the bottom of the descending support level on GBP/USD, yet a descending resistance level can also be seen.
The pair is on its way to test the top of the falling channel on the 4-hour time frame while stochastic is indicating overbought conditions. Once the oscillator crosses below the oversold region, a selloff might take place as bears push the pair back to the middle or possibly the bottom of the channel.
Shorting around the top of the channel around 1.6150 with a stop above 1.6200 could mean at least a 4:1 return on risk, depending on how wide the stop is.
By Kate Curtis from Trader’s Way