GBPUSD rallied around 300 pips on Conservative Party win in UK elections. But it seems a strong bearish divergence pattern is in the forming on the Daily Chart. Take a look at the following screenshot.
You can see the while bearish candle. This daily candle has not closed yet. When it closes and it is an inside day pattern, this bearish divergence pattern is confirmed. Take a look at this screenshot now.
This second screenshot has been taken a few hours later. You can now see the white bearish candle has turned into a bullish candle. So we should wait for the daily candle to close before we make any trading decision. When you are trading, you should take the multi timeframe approach. What this means is that we will use the lower timeframes of H1 and H4 for making the entry decision. Daily Chart will be the main chart but we then shift to H1 and H4 and look for the possible entry signals. We must ensure that our stop loss should be less than 50 pips.
The important question is why did the bearish daily candle turn into a bullish candle? Today was GBP Official Bank Rate Meeting.
The Bank of England has voted to keep interest rates steady in a release timed to fall after the general election.
This decision is enough to take the steam off the GBPUSD rally. So we have to wait for the today’s daily candle to close to confirm the bearish divergence signal.