The GBP/USD currency pair has been in a state of flux, with traders eagerly awaiting a breakthrough. The pair has been trading within a range, with repeated failures to break above the $1.3637 area, which has left many traders discouraged. However, the recent price action has shown higher lows, indicating a potential shift in the market dynamics. The uncertainty surrounding the US Dollar adds to the intrigue, with the possibility of a significant bullish breakout beyond the $1.3637 area. This level has been tested three times already, and a successful breakout could generate powerful profits on the long side. However, there is another key resistance level not far above $1.3637 that bulls would have to overcome to make strong progress in a long trade. The "coiling" below $1.3637 is attracting the interest of more traders, and the price action is showing higher lows since May 4th. The month of May has produced a consolidation with a flat top and a series of higher lows, and the pressure on the sell orders at about $1.3637 looks like it must be increasing. Even if a bullish breakout occurs, it is not clear how much room the price will have to rise, with a key resistance level overhead at $1.3666. The potential for a short trade setup is also present, with a strong bearish rejection of the $1.3637 area and impulsive bearish momentum. The price should be able to fall all the way to $1.3580 without encountering any strong support. The key to trading this pair is to watch how the price reacts when it reaches $1.3637, with long trades likely to be good opportunities if the price gets established above $1.3666, and short trades an option if the price rejects $1.3637 with a firmly bearish move. The market is relatively slow today without any high-impact economic data releases, so traders should be cautious and monitor the price action closely. The risk is 0.75%, and trades must be taken before 5 pm London time today. Long trade ideas include entering a long position following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.3581, $1.3537, or $1.3512, with a stop loss 1 pip below the local swing low and a break-even move once the trade is 25 pips in profit. Short trade ideas include going short following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.3637, $1.3666, or $1.3707, with a stop loss 1 pip above the local swing high and a break-even move once the trade is 25 pips in profit. The best method to identify a classic "price action reversal" is for an hourly candle to close, such as a pin bar, a doji, an outside, or an engulfing candle with a higher close. The USA/Iran war and related tensions have been going on for several months, and a return to kinetic war could send the USD higher as it tends to get a boost as a safe haven in these circumstances. However, with Iran strongly rejecting US deal offers and insisting on terms beyond President Trump's red lines, the possibility of a sudden return to kinetic war is a concern. In my opinion, the GBP/USD pair is a fascinating one to watch, and the potential for a significant breakout is high. However, traders should be cautious and monitor the price action closely, as the market is relatively slow today without any high-impact economic data releases. The key to success in this market is to be patient and wait for the right opportunity to present itself, and to be prepared to act quickly when it does.
