Earlier this week, GBPUSD was opened on 1.4379 level. On a daily basis, this particular pair is in an uptrend. The rise of GBPUSD started on February 28th 2016 where the GBPUSD was right on its lowest point on 1.3835 level. At the moment, this pair is strengthening to 1.4326. Will it keep getting stronger? What exact price could this pair actually reach?
When the Bollinger Bands indicator (20 period) is applied, it is seen that the upper band is nearly hit, while the breakout level is on 1.4045 level. Compared to current price, it has reached 2% from the breakout level and is going through its 11th day. Is the GBPUSD saturated already in terms of rising? Currently, it becomes relative to say that GBPUSD is in a saturated condition because on a daily trend basis, it can be seen that the pair has had a quite big rise these past two weeks while in weekly term, it clearly shows that GBPUSD has been in a bearish condition for a fairly long period of time. Thus, there comes a possibility that in mid term, a correction would occur in this pair.
The graphic shows the GBPUSD on weekly period with MA 10, MA 25, and MA 50 indicators on. It can be seen that the Bollinger Bands are widening, as it is known that it is Bollinger Bands nature to widen and then narrow afterwards. In such widening condition, there is a huge possibility that GBPUSD will rise. At the moment, it is also attempting to penetrate the MA 10 and once it happens, the GBPUSD will make its way to the MA 25 (Bullish Target).
In such condition, GBPUSD trading scenarios could be applied for both long and short positions. Here they are:
In order to take a long position on GBPUSD with a quite high risk/reward ratio, stop loss order on level 1.4116 could be placed, as well as a profit target on 1.4909 level. In such scheme, the targeted profit is counted to be near 593 pips while the loss on the stop loss point would be around 200 pips. In the meantime, a certain scenario in which the firstly mentioned scenario does not take place should wisely be prepared. For the open position of plan B, the stop loss point should be used as the position where the sell order should be placed. With such position, a target of roughly 280 pips from 1.4116 to 1.3838 could be achieved.
At the moment, the risk/reward ratio for the selling scenario is around 1.36. The sell position could be ordered at the current price of 1.4326 with 1.3838 as the target, making around 488 pips as the profit target. The stop loss point would better be on 1.4669 (around 343 pips). Once the stop loss point is hit, a position of sell should be opened on the exact same price with 1.4909 as the profit target (around 240 pips).
Considering both scenarios, at the moment it is believed that the long position is more profitable even though the GBPUSD is seemingly high enough. On a daily trend basis, it surely has been going on for 11 days. However, in weekly terms it has already started the bearish trend since last November, resulting the trend considered to be saturated and could lead to the beginning of bullish trend.