On March 9 we entered a long GBP/USD trade (see below) at 1.4967 with a stop at 1.4850 and a target at 1.55.

The trade is looking very good right now as the market dipped as low as 1.4875 shortly after the trade was entered but has rallied to 1.5382 in trading today.

We were looking for a rebound from deeply oversold levels to the mid-Bollinger Band, which was around 1.55. Naturally, the Bollinger Bands have come down and we have acheieved the target in that sense.

We have been keeping a close eye on the chart and also see that we are within the 05% to 61.8% ‘box’ retracement level of the drop from mid-February to March 1. The top of the ‘box’ is at 1.5422 — slightly below our target.

Still, we aren’t eager to take our profits. The GBP has been pounded down and it’s clear that the bleeding has subsided. The question now is: is this a rebound, or a sideways move?

Experience tells us that a sharp sell-off rarely ends in a complete reversal. Generally, the market moves sideways before changing direction. Technically, however, we have yet to see a sell signal.

It’s a tough call but we think that after two strong days to the upside, the balance of risks points to some consolidation. Since we are close to the day’s highs; we’re going to book the profit. We will be looking for ways to get back into GBP/USD, potentially buying at 1.5230.

Trade closed: +512 pips in GBP/USD.