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I’m going to get started today on the Greater British Pound versus the US Dollar [GBPUSD]. Starting on the Daily Chart, of course over the past several weeks, we have discussed the uptrend pattern that’s been in place since July of 2013. We’ve also discussed the three distinct ranges that have developed through the life of this trend. The wider range on the far left-hand side, between the mid to low-1.5900s, capping out as resistance into the mid-1.6200s for a several week period of time.
Then finally we broke above the resistance of that first range, made a second range here, capping out just underneath the 1.6600-level. Now, a couple of weeks ago, we saw a break above 1.6600 and, ever since then, we have continued to find support on top of 1.6600 here for the GBPUSD. We’ve capped out at resistance all the way at the top of the chart, into or just underneath the 1.6800-level. So, for the past few weeks, we’ve been bouncing around between 1.6600 and 1.6800 – the third and smallest of the three ranges here for the GBPUSD on the Daily Chart.
Now, let’s go ahead and zoom in a little bit. See a little bit more detail of the current range that we’re in. We could see today, yesterday, and for the past week or so, holding as support on top of the 1.6600-level. And I’ve continued to note that as long as we stayed above 1.6600, regardless of the spike underneath it, as long as the market has closed or held above 1.6600, there was some potential reversal. We saw that last week, where the market first came down to challenge 1.6600, pressuring all the way back up into the 1.6700s.
Now we’re back down here once again into 1.6600. This will be our critical decision point for the day today. If you’ve sold it at any point over the past week, here in the purple-shaded area or even all the way up here into the yellow-shaded area, of course you want to be protecting profit as it challenges here into 1.6600, because there’s a great expectation of support here. So let’s go ahead and put an arrow right here, knowing that this area is our support. 1.6600 could be as deep as 1.6550 at the bottom of that green-shaded area, but the green zone is our zone of support.
Staying within or above it, potential reversal to go back up in the direction of the longer-term trend. Now, all of that will change and the pattern of the trend changes if we get underneath this green-shaded area and possibly underneath the blue trend line. And what I mean by the pattern of the trend changing is the pattern that we’ve just spoke about. These orange-shaded areas. If you note here, going back in time, at no point in time did we get a break underneath.
Let me zoom out one more time here on the Daily Chart. Take a look at the first range. We never got a break underneath the bottom of that range. No open and close clear candle body under that green zone down here into the 1.5930s and 1.5890s. No break underneath. Then it broke to the topside. Second range: no open and close clear candle body underneath the green zone of the second range. So, here again, as long as it stays above that green-shaded area, it doesn’t open and close underneath it, then there’s potential for reversal and a continuation back higher.
When I say reversal, I mean from the downward motion that we’ve seen over the past few days pressuring lower down towards 1.6600. As long it stays above the green zone, potential to go back up in the direction of the trending pattern. The pattern of the trend breaks when we see a push underneath the 1.6550 to 1.6600-level.
Now let’s go ahead and take this information down to the 4-Hour Chart. Now, it’s going to start to look a little bit cluttered because we have a lot of shaded areas. A lot of lines on this chart, but I think you’ll get the main focus. Of course the main focus is this green zone. I’ve actually put a second line in there at 1.6580 because that also has held as some support right around the 1.6580-level. So, between 1.6580 and getting it a little bit tighter now to 1.6600, that’s about a 20-pip zone highlighted at the top of the green-shaded area. As long as it stays above there, we could be looking for support and rallies higher.
Yesterday, in the Trade Room, we talked about the bank flow levels coming in and the bank flow levels capping the market yesterday, challenging here into the 1.6650s. Could not break higher into the bank flow levels and then reversed all the way back down to 1.6600. Same thing today. I expect that the bank flow levels will be very similar to yesterday’s levels. Very similar. Unless we see a large amount of market movement over the next couple of hours before the bank flow levels get published, I expect that we’ll see them very similar. If anything, back up here into the yellow-shaded area, even if we see some bullish behavior.
If we see bearish behavior, likely to see those bank flow levels a little bit lower here into the purple-shaded area. So, for the day today, here’s your setup. As long as it holds within or above the green zone, potential buys in the direction of the trend, but I think those buys will be very limited to targeting the bank flow levels. And as you could see, if you’d have bought it here, then your target was the bank flow levels because then it repelled to go back down. So, if you buy it into the green zone – 1.6600 -, target the bank flow levels. That becomes the limit of your target.
And right now that seems to be this purple-shaded area. Let’s go ahead and put an arrow here. Purple-shaded area becoming resistance for the GBPUSD right now. Any break above the purple-shaded area, and we’ll call it 1.6650. Above 1.6650, we’ll likely push back towards 1.6700 and the yellow-shaded area at top of the chart. So, we’re in a period of congestion. Purple zone is resistance. Green zone is support. Trading either direction, sells or buys will come here into the green zone or the purple zone. Selling into the purple zone. Buying into the green zone. Clearly, at some point in time, we will see a breakout of one of these areas and a continuation either higher or lower for the GBPUSD.
One last clue is of course the Forex Black Book trend bar at the very bottom of the chart. This week has gone red. It is dark red, but it is red. So, sells on rallies into resistance would become our favored direction here for the Forex Black Book this week for the GBPUSD.
