Recent Price Action
The British pound has rallied strongly in recent weeks as the threat of a no-deal Brexit recedes and the likelihood of a delayed Brexit increases as the days go by.
Subsequently the GBP/USD and the GBP/JPY have both moved strongly higher, and the EUR/GBP has fallen sharply as it has strengthened against the Euro.
It is this particular pair that I want to focus on in this article because this popular, slow-moving forex pair is now trading close to a key support level that may just prevent the price from falling any further.
2018 Low
The support level that I am talking about is simply the low of 2018. As you can see in the weekly chart below, the lowest price from last year was 0.8620, and interestingly enough, the current price at the time of writing is just a fraction above this at 0.8634, although it did actually hit this price yesterday before reversing.
Therefore as we haven’t really seen any strong support in this recent price fall, this may be the point at which traders start to bank their profits and open new long positions if there is the slightest indication of strength or a clear sign of a reversal.
Potential Trading Opportunity
Whenever the price of any instrument approaches a key support or resistance level, it is always interesting to watch the price action and see how it reacts around this level.
So in this case we really need to see clear signs of strength in order to be confident of a reversal, even if it turns out to be a relatively modest one.
The price of any pair that includes the British pound is still heavily influenced by Brexit, which means that this is not really a time to take long-term trades.
This is a time to take quick short-term technical trades and get out as soon as you are showing a decent profit, and so it may be worth opening a long trade on a pin bar, for example, on one of the lower time frames.
Alternatively if the price ambles along around this key support level and doesn’t really show any real signs of strength before eventually breaking below this level, this could be a time to jump on board with a short position.
That’s because the price is now trading close to the 200-week exponential moving average, and there is a lot of downside potential if the price breaks below this level.
Either way, it is worth keeping an eye on this particular pair to see what happens in the coming days.
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