The GBPUSD has sold off from its resistance area, marked in light grey in the above H4 chart, and the momentum was strong enough to force this currency pair into a breakdown below its support area which is marked in light blue. A short-covering rally took the GBPUSD to a breakout above its support area which has now been reversed once again and this currency pair is now expected to be faced with another short-covering rally.
The Bollinger Band Indicator has diverged and the upper band is now sloping to the upside, while the middle band as well as the lower band are both sloping to the downside. The lower band is trading inside of its support area. Forex traders are likely to look for good exit positions in order to realize floating trading profits and close their sell orders. This is expected to lead to a short-covering rally during the next trading week.
Forex traders are advised to look for long entry positions at 1.5500 and below in order to take advantage of the expected short-covering rally. Conservative forex traders are recommended to await the breakout above its middle Bollinger Band before entering their long positions. A take profit target of 1.5785 has been set for a potential trading profit of 285 pips on the H4 Chart. More buy orders are expected after the GBPUSD break outs above its middle Bollinger Band.
Forex traders should protect this trade with a stop loss level at 1.5400 for a potential trading loss of 100 pips which will result in a Risk-Reward (RR) ratio of 2.85.
Long @ 1.5500
TP @ 1.5785
SL @ 1.5400