GBPUSD

How to Trade GBP/USD Near the 1.2500 Support Level

How to Trade GBP/USD Near the 1.2500 Support Level

The GBP/USD pair has been in an uptrend since early April, as the UK economy showed signs of recovery from the coronavirus pandemic and the Brexit uncertainty. The pair reached its highest level since April 2022 on Wednesday, May 10, at 1.2677, before retreating to a one-week low of 1.2496 on Thursday, May 11.

The pair found some buying interest near the 1.2500 psychological mark, which coincides with the lower end of a short-term ascending trend line extending from early April. The pair bounced back to the 1.2525-1.2530 region during the first half of the European session on Friday, May 12, and seems to have stabilized for now.

What are the key factors influencing GBP/USD?

The GBP/USD pair is influenced by a number of factors, such as:

– The monetary policy stance of the Bank of England (BoE) and the Federal Reserve (Fed), which determine the interest rate differential between the two currencies.
– The economic data releases from both countries, which reflect the strength and weakness of their respective economies.
– The political developments and events in both countries, such as Brexit negotiations, trade talks, elections, etc.
– The market sentiment and risk appetite of global investors, which affect the demand for safe-haven currencies like the US dollar or riskier currencies like the British pound.

What are the key levels to watch for GBP/USD?

The GBP/USD pair is currently trading near a critical support level at 1.2500, which is also the lower end of a short-term ascending trend line. A break below this level could signal a reversal of the uptrend and open the door for further losses towards 1.2400 and 1.2300.

On the other hand, if the pair manages to hold above 1.2500 and resume its uptrend, it could face resistance at 1.2600 and 1.2700, which are previous highs and round numbers. A break above 1.2700 could pave the way for a test of 1.2800 and 1.2900.

How to trade GBP/USD near the 1.2500 support level?

There are different ways to trade GBP/USD near the 1.2500 support level, depending on your trading style and risk tolerance.

One way is to use a breakout strategy, which involves entering a long position if the pair breaks above 1.2530 or a short position if it breaks below 1.2470, with a stop loss at 1.2500 and a target at 1.2600 or 1.2400 respectively.

Another way is to use a bounce strategy, which involves entering a long position if the pair bounces off 1.2500 or a short position if it bounces off 1.2530, with a stop loss at 1.2470 or 1.2560 and a target at 1.2600 or 1.2400 respectively.

A third way is to use a range strategy, which involves entering a long position if the pair dips near 1.2500 or a short position if it rallies near 1.2530, with a stop loss at 1.2470 or 1.2560 and a target at 1.2530 or 1.2500 respectively.

Conclusion

The GBP/USD pair is trading near a key support level at 1.2500, which could determine its next direction in the short term. Traders should pay attention to the economic data releases from both countries, as well as the monetary policy decisions of the BoE and the Fed, which could trigger volatility and breakouts in the pair.

 

 

 

Author
Martha Pulido is a talented author and financial analyst with a strong focus on forex trading. As a regular contributor to Livemarkets.com, she provides insightful analysis and commentary on a wide range of forex pairs. Martha's deep understanding of market dynamics, combined with her ability to interpret economic indicators, enables her to make accurate predictions about currency movements. Her analysis is highly regarded in the forex community and has helped many traders make informed decisions about their investments.