Looking forward to sell GBPUSD and target the Week open gap

Today, market opened with a big gap up for all the major currencies, and that is the reason why we would be looking for a sell opportunity for GBPUSD. GBPUSD too opened with a gap higher, and traded as high as 1.59570 as shown in the 4 hour chart below. RSI is coming to the extreme levels at around 80 in the 4 hour chart, which is a clear sign of overbought conditions.

In order to jump into a sell trade for GBPUSD we need some more clear signs first. One way to trade would be the break and close below the today’s support as plotted on the 4 hour chart below at around 1.5930. If the pair closes below the said level and forms a bearish candle pattern on the 1 hour chart, then we would jump into the trade.

Another way would be if the pair pushes to the upside, and approaches next major resistance just around 1.5980/1.6000 as shown in the daily chart below, then we can jump into a sell trade with a bearish divergence on the 4 hour chart. Initial target would be the gap close at around 1.5880, and final target could be around 1.5820, which is the next major support. Stop should be placed above the previous high in the first case, and above 1.6040 for the second case.

Reviewing earlier events and trades
This week started with a surprise gap down for US dollar with the news of Larry Summers withdrawing his name for Fed Chairman. US dollar was seen heavy at the opening bell as EURUSD, GBPUSD and AUDUSD opened with more than 50 pips gap up. There was speculation that he would speed up the taper process, and his withdrawal came like a surprise, which caused US dollar to lose ground against all major currencies.

Fundamental Outlook for the day
This week is very important as we have FOMC meeting scheduled later in the week. Today, we have US industrial production and NY Empire State Manufacturing Index data lined up later in the US session. Both the data are expected to show improvements. However, if the data falls below the expectations, then it would further cause pressure on the US dollar. Also, in the Asian session, we have RBA monetary policy meeting Minutes scheduled, and it would be interesting to know what RBA has to say about recent economic data. I would advise to be very careful this week friends as we have some important events lined up in this week.

This analysis is taken from today’s Daily Market Forecast, which also includes trade opportunities on: EURGBP, NZDUSD, USDJPY, USDCAD, GOLD, SILVER, DOW JONES and GBPJPY .
Get it HERE: Vladimir’s Markets Forecast

I wish a Green week to everyone. Happy trading!