Trade of the week: long GBP/USD
GBP/USD is benefitting from the US' ratings downgrade, weaker US dollar and technically has broken through a downtrend line which is why we would like to go long with a stop loss below the recent $1.3139 low and an upside target between $1.3850 and $1.3900.
(Video Transcript)
This week's trading opportunity
Axel Rudolph: Hello, and welcome to "Trade of the week" on Monday 19th May, 2025. And, let's look at today's trade, which is to go long GBP/USD because the US debt was downgraded by Moody's on Friday and also because of the recent trade deal, or the announcement of a possible trade deal, probable, actually, between the UK and US, perhaps aiding the UK economy to do better in the future.
So, from a technical perspective, if we look at GBP/USD, we can see we've been in an uptrend since the beginning of the year, on this daily chart here. And, at the moment, we are in the process of breaking through that resistance line, which we’ve had in place since late April. It's actually a downtrend line because we had three touching points. And the fact that we've broken through that downtrend line today, plus have risen above the highs seen last Wednesday at $1.3360, leads me to believe that we are going to head higher in the coming days and weeks.
And, how far could we go? We can see we topped out back in April around the highs seen in September of 2024. That was just above $1.3430. And if we managed to break through here, which I believe likely, we are most likely going to be heading back up again towards this resistance area here towards $1.3850 to $1.3900 area on Cable (GBP/USD).
Previous weeks' trading outcomes
Now, just for transparency sake, I'd like to also mention last week's trade, which was to go short New York cocoa. You can see here the cocoa price was falling. We were at resistance and I thought we were going to come off, which we did a little bit, but we didn't hit our downside target. And instead we went back up again and we got stopped out here with 2% hypothetical risk on that trade.
And the week before we went short USD/JPY. And again here, we were unlucky. We went short around ¥144.00, came down a bit, but then we got stopped out above this high and now we're trading back below it. But, yes, these two trades didn't go right.
But let's go back to today's "Trade of the week", which is to go long GBP/USD at around current levels at $1.3360, with a stop-loss below the current May low around $1.3139 and an upside target around $1.3850 to $1.3900.
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