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Trade idea: buy GBP/USD

Formation of rising wedge puts the rally into doubt, thus adjusting stops and targets seem sensible to reflect this.

CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.
Pound and dollar
Source: Bloomberg

Stop loss now moved to $1.4270, with target moved to $1.4400 for GBP/USD. Risk to reward remains around 3:1.

Rationale for the adjustment

We have seen the pullback for entry into this trade, alongside a subsequent rally (up over 100 points this morning). However, the formation of a rising wedge, alongside weakening signs in oil points towards a lower confidence that this move has legs. We are seeing some strength coming back into play, with a bounce from trendline support and the 70% retracement (both previous rallied have come between 67-70% pullbacks.

This gives us the potential for another move to the top of this range, which provides us with the $1.4400 target. To the downside, the break of trendline support would provide a bearish signal and thus a stop loss of $1.4270 reflects this. Alternately, a stop loss below $1.4230 would trade a less preferential risk/reward ratio for a greater chance that this is simply a deeper retracement.

To me, it boils down to your view of oil and I am starting to see signs of a bearish turnaround which would negatively affect this pair. 

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CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.