GBP/USD just broke below the long-term rising trend line on its 4-hour chart recently but appears ready to make a pullback before resuming its selloff.
The pair has bounced off support at the 1.6300 major psychological level earlier in the month and has pulled up to the 38.2% Fibonacci retracement level on the latest swing high and low. Stochastic is already indicating overbought conditions, which means that the downtrend might resume soon.
Shorting at the test of the trend line around the 1.6450 minor psychological resistance or at market around the 38.2% Fib level with a stop back above the trend line could yield a high return on risk if one aims for new lows. Moving the stop to entry once price tests the former lows around 1.6300 is a good way to reduce risk.
By Kate Curtis from Trader’s Way