The market just gave us a massive signal. While most people were panicking over the Bank of England's rate decision, the charts were painting a clear picture for those paying attention. It’s a picture of strength, of confirmation, and most importantly, of opportunity.

The Bank of England's rate cut sent a shockwave through the market, but for us, it's a green light. GBPUSD is holding strong above the critical 1.3400 level, and I'm about to walk you through my exact plan to ride this move up to 1.3600—including my entry, profit targets, and stop-loss. This isn't theory; this is the actionable plan I’m using right now, based on a mix of fundamental and technical factors that are all pointing in one direction.

The "Why" - Unpacking the BOE's "Hawkish Cut"

Alright, let's get right to it. To see why this trade setup is so powerful, you have to understand the story behind the Bank of England's decision. This wasn't a simple rate cut. The market is calling it a "hawkish cut," and that distinction changes everything for us as traders.

So, what does that even mean? A hawkish cut sounds like a contradiction, doesn't it? How can you be aggressive and cautious at the same time? Well, it all comes down to the vote and the language they used. The Monetary Policy Committee, or MPC, voted to cut the bank rate by 25 basis points, taking it from 4.25% down to 4.0%. On the surface, a rate cut is usually bad for a currency. Lower interest rates mean less return for holding it, so big money tends to flow out. But the devil is always in the details.

 

The vote was incredibly close: 5-4 in favor of cutting. The market was expecting a much more decisive 7-2 split. This tells us the committee is deeply divided. Four members wanted to keep rates on hold, which signals they're still very worried about inflation. That tight split sends a powerful message: don't expect a series of rapid, aggressive cuts. The bank is being extremely careful. Governor Andrew Bailey himself stressed that policy is still restrictive and warned against cutting too quickly. They're essentially saying, "Yes, we're cutting now, but we're watching inflation like a hawk and won't hesitate to slam on the brakes." This cautious, hawkish tone is what's giving the Pound its strength. While they cut, they signaled that future cuts are far from guaranteed, which has led many to believe that the path for rates will be slow and data-dependent.

Now let's talk inflation, because that's the heart of the issue. The Bank of England's whole job is to keep inflation at 2%. But UK CPI inflation has been stubborn, hitting 3.5% in the second quarter of 2025. It remains well above the target, and this stickiness, especially in services and wage growth, is what's making nearly half the committee nervous. They even noted that the risks of inflation staying higher in the medium-term have actually increased a bit since their last report.

So, why does this matter for our GBPUSD trade? It creates a powerful divergence. On one side of the Atlantic, you have the Bank of England, forced to cut because of a sluggish economy but doing so with extremely cautious language because inflation won't go away. This puts a floor under the Pound. On the other side, you have the US Dollar, which has been showing some signs of weakness amid a softening economic picture. When you get one currency that's unexpectedly resilient (the Pound) and another that's looking a bit shaky (the Dollar), you get the perfect recipe for a strong move up.

This "hawkish cut" was the fundamental spark we needed. It took the event-risk off the table and confirmed that the underlying market dynamics favor a stronger Pound. Its why, instead of tanking, GBPUSD has found solid ground and looks ready for its next leg higher. This is the foundation of our trade. It's not just a squiggly line on a chart; it's backed by what the world's central bankers are actually doing and saying. Understanding this "why" is the first step to having the confidence to take the trade.

The Big Picture - Top-Down Technical Analysis

Now that we have our fundamental idea—a hawkish BOE versus a softening US Dollar—we need to see if the charts agree. A great trade idea is useless if the technicals are fighting you. So, let’s jump onto the charts and do a proper top-down analysis, starting big and then zooming in. This is how professional traders get a full picture of the market.

Let’s start with the weekly chart. This gives us the long-term story of GBPUSD. What I see here is a clear, established uptrend that started from the major lows back in 2022. The market is making a series of higher highs and higher lows—the textbook definition of a bull market. This isn't a flash in the pan; it's a multi-year recovery. For me, the key level to watch on the weekly is the 55-week exponential moving average. As long as we're above it, the dominant, long-term trend is up. This is our anchor. It tells us that by looking for buys, we're trading with the big money flow, not against it.

 

Now, let's drill down to the daily chart. This is where the story gets really interesting. The price has been trending up for most of this year, just like the weekly chart showed. But we had a pretty big pullback in July. That's normal. Markets breathe—they move up, pull back, consolidate, and then go again. What's important is where that pullback stopped. The selling ran out of steam, and the price found its footing right around key support zones, even before the BOE announcement gave it the final push.

The price action leading up to the rate cut was telling. We saw five straight days of gains, a clear sign that buyers were stepping back in with force. This rally broke through some important technical levels. It broke out of the descending channel that defined the July pullback. It also decisively cleared the 100-day simple moving average, an indicator a lot of institutional traders watch. Breaking back above the 100-day MA is a big deal; it signals the medium-term downtrend is likely over and the main uptrend is back in play.

This brings us to the 4-hour chart, which is where we fine-tune our plan. On this timeframe, the bullish momentum is even clearer. You can see the aggressive move up after the rate decision. The price has not only broken key structures but is now holding above them. Now, looking at the Relative Strength Index, or RSI, it did pop into overbought territory, above 70. A lot of new traders see an overbought RSI and immediately think "sell." That's a huge mistake. In a strong trend, an overbought RSI is a sign of strength, not a reversal. It tells us momentum is powerful. But, it also suggests the market might need to take a breather—consolidate or pull back slightly—before going higher. This is perfect for us. We don't want to chase the price at the top. We want to wait for that little dip to get in at a better price.

 

So, this top-down look tells me that every timeframe is singing the same tune. The weekly trend is up. The daily chart shows the correction is over. And the 4-hour chart confirms the massive momentum while hinting at the exact entry opportunity we're looking for. When the charts align like this, you're looking at a high-probability setup.

The Core Strategy - Defining Our Battlefield

Okay, this is where we turn analysis into a concrete plan. We've got the "why" and the technical confirmation. Now we need to define the battlefield. For a trader, this means identifying the precise support and resistance levels that will control the trade. These aren't random lines; they're psychological areas where the big battles between buyers and sellers are fought.

My entire trade plan pivots on two main levels. First is our line-in-the-sand support: the 1.3400 area. Second is our main objective, our profit target: the 1.3600 resistance zone. Let's break down why these two numbers are so critical.

First, our support at 1.3400. This isn't just a random number; it's a powerful combination of factors that make it a strong floor for the price.

1.  Psychological Level:  1.3400 is a major round number. People are naturally drawn to clean numbers, and this plays out in the markets. Big orders from banks and funds tend to cluster around these levels, creating a natural zone of demand. Holding above 1.3400 is a statement from the bulls.

 

2.  Proven Structure: If you look left on the charts, 1.3400 has been a critical pivot point before, acting as both support and resistance. When a level has a history of being respected, it gets stronger each time it's tested. The market just broke above this level, and a classic rule of technical analysis is that old resistance becomes new support. The fact that the price has now held above this zone confirms its new role as a floor.

3.  Indicator Confluence: This level isn't alone. It lines up perfectly with the Fibonacci 38.2% retracement of the recent down-move, a key spot where reversal traders look to buy. It also sits right near the 100-period Simple Moving Average on the 4-hour chart. When you get a psychological number, a structural pivot, a Fibonacci level, and a major moving average all in the same spot, you have what I call a "high-confluence support zone." This is where I expect buyers to show up in force.

Now, let's look at our target: 1.3600. Just like our support, this level is chosen for specific, objective reasons.

1. Historical Resistance:  The 1.3600 area was a major high back in July, a peak where a big sell-off started. It's a natural target for the current rally. A lot of traders will be looking to sell there, creating a pool of supply that could cap the price.

2.  Technical Projections: Different types of analysis, like wave projections, also point to 1.3600 as a logical place for this current bullish move to run into trouble. It's the next major hurdle.

 

3.  Interim Levels: The path to 1.3600 won't be a straight shot. There are smaller hurdles along the way, like 1.3460, the big psychological number at 1.3500, and 1.3530. These aren't my main targets, but I use them as checkpoints to manage the trade, which we'll cover next.

By clearly defining our support at 1.3400 and our target at 1.3600, we've created our trading sandbox. I know where I'm looking to get in, I know where I'm aiming, and I know the milestones along the way. This clarity is everything. It removes emotion and guesswork.

The Exact Trade Plan - Entry, Stop Loss, and Profit Targets.

This is the most important part. This is where we turn all that analysis into a precise, mechanical trade plan. I'm going to lay out the exact entry triggers I’m looking for, where my stop-loss goes, and how I plan to take profits. This is the detail you need before you ever risk a single penny.

Part 1: The Entry Strategy

A common mistake is to just place a blind buy order on a support level like 1.3400. That's lazy and dangerous. I need to see proof that buyers are actually defending the level before I jump in. Here are the specific entry triggers I'm watching for. I only need one of them to play out.

Trigger 1: The Retest & Bullish Engulfing. My ideal entry is a pullback into the 1.3400 to 1.3420 zone. I want to see price dip into our support area, and then on the 1-hour or 4-hour chart, I want to see a powerful bullish candle form. The best-case is a "bullish engulfing" candle, where a big green candle completely swallows the previous red one. This is a clear signal that sellers tried, failed, and got run over by buyers.

 

Trigger 2: The Pin Bar Rejection. Another great signal is a "pin bar" or "hammer" candle. It has a long lower wick and a small body at the top. It tells a story: sellers pushed the price way down, but by the end of the session, buyers stormed back in and pushed it all the way back up. It’s a footprint of institutional buying, and seeing one in my support zone is a clear trigger to go long.

Trigger 3: The Higher-Low Confirmation. If the pullback is very shallow and doesn't quite reach 1.3400, I'll look for a small consolidation. If the price then forms a low that's clearly higher than the previous one and breaks out, that's my entry. It confirms the bullish momentum is so strong that buyers aren't even waiting for the main support level.

My entry will be based on one of these price action signals. I don't buy just because it's "near" support. I need confirmation.

Part 2: The Stop Loss - Our Protection

Trading without a stop loss is financial suicide. It has to be placed at a logical level that proves my trade idea is wrong if it gets hit. My stop will go below the 1.3400 support structure, somewhere around 1.3350.

Invalidates the Thesis:  If the price breaks 1.3400 and hits 1.3350, my entire reason for the trade—that 1.3400 is strong support—is wrong. I want to be out, taking a small, managed loss.

Accounts for Noise: Placing it at 1.3350, not right at 1.3390, gives the trade room to breathe and avoids getting taken out by random volatility or "stop hunts."

 

This defines my risk to the dollar before I even enter the trade.

Part 3: Profit Targets and Trade Management

Our main target is 1.3600. This gives us a fantastic risk-to-reward ratio. If I enter around 1.3420 with a stop at 1.3350, I'm risking 70 pips to make a potential 180 pips. That's a ratio of over 1-to-2.5, a professional-grade setup.

But I don't use an "all-or-nothing" approach. I manage the trade by taking some profits off the table along the way.

Target 1 (T1): 1.3500: As the price nears this big psychological number, I'll close a part of my position, maybe a third or a half. As soon as T1 is hit, I move my stop loss to my entry point. This makes the rest of the trade risk-free. It's now impossible for me to lose money.

Target 2 (T2): 1.3600: This is my final target. As we approach this major resistance, I'll close the rest of my position. I won't get greedy and hope for 1.3700. The plan is to trade from my support to my resistance. Target hit, trade over. We bank the profit and look for the next setup.

This complete blueprint is how I plan to trade this GBPUSD move. It's proactive, logical, and has capital protection built in.

If you're finding this detailed breakdown valuable, make sure you hit that share button. The market is always serving up opportunities, and my goal is to help you spot them and trade them with a clear plan.

 

Risk Management & Alternative Scenarios.

A professional trader is a master of risk. It's easy to have a plan for when you're right. The real skill is knowing exactly what to do when you're wrong. Let's cover the risks and alternative scenarios.

Scenario 1: The Trade Works Perfectly

This is the dream. We get our entry, price moves to 1.3500. We take some profit, move our stop to breakeven. Price then continues to 1.3600, and we exit for a great, risk-free profit. This is the goal.

Scenario 2: The Entry Signal Never Shows Up.

What if the price just screams higher and never gives us our pullback? It happens. The fear of missing out (FOMO) is real. The amateur chases the price and buys late at a terrible price. Our rule is simple: if we don't get a valid entry signal from our plan, we don't trade. Period. We walk away. Preserving capital by not taking a bad entry is a win.

Scenario 3: We Get Stopped Out Immediately.

This also happens. We get a perfect-looking entry, we get in, and the market immediately reverses and hits our stop loss at 1.3350. How do we react? We don't. We accept the small, pre-defined loss. The stop was there for a reason. The trade idea was wrong. We don't revenge trade. We don't move our stop. We take the small hit and wait for the next high-quality setup.

 

Scenario 4: The "Whipsaw"

This is a key one. The trade triggers, rallies to our first target at 1.3500. We take partial profits and move our stop to our entry. Then, the market reverses and stops us out on the rest of the position for breakeven. Is this a failure? Absolutely not. This is a winning trade. We booked a real profit on the first part and lost nothing on the second. Our management plan protected us from a winning trade turning into a losing one.

Considering the Other Side

We also have to respect the risks.

Overbought Conditions:  That high RSI means the market could pull back deeper than we expect, maybe taking out our support before going higher.

Divergent Analyst Opinions: Not everyone is bullish. While my short-term thesis is strong, some long-term forecasts are all over the place. Morgan Stanley reportedly sees GBPUSD falling longer-term, while other forecasts are also bearish. At the same time, Goldman Sachs has a very bullish target. This wide disagreement just highlights the uncertainty out there. It reminds me that my trade is a tactical one—from 1.3400 to 1.3600. That's it. I'm not trying to predict next year.

By thinking through these scenarios, we're prepared for whatever the market does. We have a plan for being right, wrong, and everything in between.

So, let's wrap it all up. This opportunity on GBPUSD isn't random. It's a high-probability setup backed by a clear sequence of events.

 

First, the fundamental catalyst: the Bank of England's "hawkish cut," which put a floor under the Pound.

Second, the technical confirmation: the long-term trend is up, the daily chart has reversed, and the short-term charts show huge momentum.

And finally, the most important part, our actionable trade plan. We've defined our battlefield between support at 1.3400 and resistance at 1.3600. We have specific entry triggers, a logical stop loss at 1.3350, and a disciplined profit-taking strategy to make the trade risk-free.

This is the process. This is the discipline. This is how you move from gambling to trading with a strategy. You wait for the stars to align, you build a detailed plan with a good risk-reward, and you execute with discipline.

Let me know what you think about this GBPUSD setup in the comments. Do you agree? See something different? The best traders are always open to new ideas.