Trade of the week: long GBP/USD

(AI video summary)

Current trade overview: long position

In the current market environment, a trading opportunity has been identified with the GBP/USD currency pair, also known as Cable. The strategy involves taking a long position based on recent market movements and technical breakout patterns.

Trade setup

• Entry point: long GBP/USD at $1.3360, following a break through the downtrend line in place since late April
• Stop loss: set at $1.3139, positioned below the recent May low to limit potential losses if the market moves against the position
• Target: aim for an upside target of $1.3850-$1.3900, capitalising on the expected continuation of the uptrend

Risk-reward ratio

This trade offers a favourable risk-reward ratio, making it an attractive proposition for those willing to take on the associated risks. However, it is important to note that this is a high-risk trade, and sometimes the best decision is to refrain from trading.

Market context

The British pound has shown strength against the US dollar following Moody's downgrade of US debt on Friday. Additionally, the announcement of a potential trade deal between the UK and US could provide further support for the pound, as it may enhance the UK's economic prospects. From a technical perspective, GBP/USD has been in an uptrend since the beginning of the year, and the recent break through the downtrend line that had been in place since late April signals potential for further upside momentum.

Previous trades performance

For transparency, it's worth noting that our recent trade recommendations have faced challenges. Last week's short position on New York Cocoa saw a small initial move in our favour before reversing, resulting in a stop-out with a 2% hypothetical loss. Similarly, our short USD/JPY recommendation from two weeks ago was stopped out after an initial favourable move.

Cautionary note: while this trade presents a structured opportunity, market conditions can change rapidly. Traders are advised to consider their risk tolerance and market outlook before engaging in this trade.