We face the last month of the year with the GBP/USD at 1.3359 (November 30). This level has been a resistance on July 2018, February, March, and December of 2019, and August 2020.
We are again there; and, in hindsight, this price has been an opportunity to sell GBP and buy USD on all those occasions.
We could open a short position in the GBP/USD with a stop loss in 1.3675 – 1.3685. This would mean a potential loss of around 2.4 percent which seems reasonable.
The first objective would be 1.294 for a profit slightly higher than 3 percent, but we do not think that is enough. Once you open a position, you need a potential profit greater than the potential loss, so we would at least wait until 1.2685 for a 5 percent profit. This likely means having to wait longer, but we think that time is on our side. Actually, the long-term trend is negative, and the price could fall beyond 1.2260. We do not set that objective because many things could happen until that, and it is better to review the operation once each objective has been achieved.
This would be a weekly operation, meaning that the investor needs to leave time for the price to make the movements. Impatience is not a good partner.
If things do not go as we expect, the next resistance for a potential rise of the price would be 1.4245 and then 1.49. Keep in mind that, in this case, we are basing the strategy on past behaviour, but the current price hasn’t shown any sign of a change or trend. It is going up, and we are forecasting that it will go down; so the chances of more rises for a while are still there.
Summary of our forecast:
We think that the price will go down, but this is a long-term forecast; so it may need some time to develop.
As usual, we always need to take into consideration the chance of being wrong, so the use of a stop loss is mandatory.
This is not investment advice, but an opinion for entertainment purposes. Contact our experts today for a medallion guarantee to expand your trading opportunities.