GBPUSD Challenging Historic Resistance Levels

Want FULL ACCESS To

ROSS’ DAILY TRADE ROOM?

Simply Click The Get Started Button Right Now!

Transcript of Video
Click Here to receive an email alert when Ross posts a new daily video
I’m going to begin the day today on the Greater British Pound versus the US Dollar [GBPUSD]. Starting here on the Weekly Chart and get a longer-term perspective of this currency pair, I want to go back in time and take a look at some historical resistance levels that the market seems to be challenging in the most recent days. First off, right-hand side of the chart – the two uptrend lines we see here. A blue trend line. A black trend line representing the different legs of the trend. The blue trend line. The longer leg of the uptrend. The black trend line. The shortest, most recent leg of the uptrend.

And of course we have been reaching into resistance highs over the past several days for this currency pair. Let’s take a look at three different levels. First off, the yellow-shaded area. Yellow-shaded area is the third down from the top. We can follow that backwards in time. We could see some historical congestion resistance. Candle bodies holding around that level back here into the mid-part of 2011. We see about six weeks holding as resistance there and eventually turning the market back down. Just before that we see some resistance also here into May of 2011. We go back even further to the left-hand side of the chart and a lot of congestion around that yellow-shaded area.

Now let’s go back to the right-hand side. We go up to the pink-shaded area. The pink-shaded area is the second one down from the top. We could see, currently, the last two days of trading have held as resistance here into the mid-1.6500s. We could see that resistance now. Follow that, once again, back in time. We could see back in 2011. In August of 2011, some resistance into that pink-shaded area. We can go back into May of 2011 and see resistance into that pink-shaded area. And we can go back again to the left-hand side of the chart and see historical resistance and congestion around that same pink-shaded area.

Now, just above that would be our next level of resistance. Of course we haven’t broken through the pink-shaded area and we haven”t broken through our current resistance, but if we do, a key historic resistance level here would be into the upper-1.6600s, towards the mid-1.6700s. That’s the green-shaded area at the very top of the chart. We haven’t reached there yet, but if you go back in time and look back at history, we could see this green-shaded area being a critical key resistance point for the GBPUSD just above the current market.

So, three levels of historic resistance. The market now challenging above the yellow zone, testing the pink zone, has not quite reached the green-shaded area in the direction of the uptrend that we have been in. So, as we reach into resistance, there’s two things that we want to take note of. Looking for low risk, high reward scenarios in the direction of the trend would mean that we’d actually like to see a little bit of a dip into support, come back down into support, then buy it, then look for a rally back in the direction of the trend. So, challenges back down towards the black or the blue trend line, back down on top of historical resistance, which right now is that yellow-shaded area become opportunities to trade in the direction of the trend.

Buying as we challenge resistance into the pink or the green-shaded area really doesn’t become our lowest risk opportunities because there’s a high potential of resistance. So we don’t want to buy into resistance. We want to buy into support in the direction of the trend, all the while we’re watching for clues for reversal because, obviously, each historical resistance level in the past has been a point of reversal. Temporary or long-term, but point of reversal for a period of time for the GBPUSD.

Let’s zoom it in here one time on the Weekly Chart. We could see that over the past four weeks or so – four or five weeks – we have seen resistance into the yellow-shaded area. Several weeks bouncing off of that yellow zone. Today we see the market above there, but challenging into the pink-shaded area as resistance and now, for the past two trading days, we’ve seen a fall off of the pink-shaded area and we’re now turning back down towards the trend lines and support for the GBPUSD.

Let’s go ahead now and take that information down to the Daily Chart. And again, there’s our trend lines. The blue and the black trend line. The short and the long-term trend line. We could see the historical resistance levels, even in the most recent days right here into that yellow-shaded area. We could see the resistance here now coming back down to the top side of that yellow-shaded area as support. So, it would be expectation today – under the pink-shaded area obviously we’re finding resistance, but we’re now looking for support into the yellow-shaded area and close to the black trend line. It could be the yellow. It could be the purple, but down here into the low-1.6400s. I’ll even just round it right around 1.6400. A little bit below it, potentially a little bit above it, but into that yellow-shaded area would likely be our support for the day today.

And really that becomes our best opportunity for a low risk, high reward trading opportunity today. We’ve already fallen off of the resistance highs. We’ve seen it come off of there, where the resistance highs are into the mid-1.6500s. We’re back into the upper-1.6400s. So, we’re already off of the highs. Not really an opportunity right now to sell it. Your best, lowest risk opportunity to sell it was up here. We’re seeing potential for a bearish engulfing candle develop here on the Daily Chart. Not really confident about it yet because the candle hasn’t closed. If today’s candle closes at or below the current market value, we could be seeing a bearish engulfing candle. Obviously we had the holiday in between there, but the bearish engulfing candle could be a signal of things to come as we go through the next several days or weeks for the GBPUSD.

A breakdown of the black or the blue trend line becomes an opportunity for this trend pattern to change. Remember the trend pattern is higher highs and higher lows. We’ve seen that over the past several months has not changed, but if we ever break down under the black or the blue trend line, specifically the blue trend line, we’ll likely look for a change in the pattern of the trend. Lower highs and lower lows could begin to develop over time for the GBPUSD.

Let’s take that information now down to the 4-Hour Chart. And here we are, coming down on the 4-Hour Chart. Of course, again, we did have the bank holiday right there in the middle of the week. It could be an influencer of the current market with that gap a little bit higher. We saw the market open today a little bit higher than the close on Tuesday and now it’s come back down dramatically. Still would look for support down here into the yellow-shaded area today. We could see the historical resistance along that yellow-shaded area.

Let me zoom out one time. We could see the historical resistance into that yellow zone. That, again, becomes our support for the day today. Not selling it right now because we’re too close to support. You don’t want to sell into support. You want to sell into resistance, and that’s where we are right now – into support. So you’re not really looking to sell it today. You’re more likely looking for support and an opportunity for this to turn back in the direction of the trend. We could even put a shorter trend line here. We could even take a trend line from that low to this low. That also comes into the area of this yellow-shaded area also, so, again, this is your current support. If you’re looking for an opportunity to trade today, this would about be your best opportunity into 1.6400, 1.6440. Best opportunity. Lowest risk to buy it.

Selling right now, your risk is all the way above the highest high. The risk is far too large right now to sell this currency pair. It’s coming closer to an opportunity to buy into historical resistance as support. But keep in mind: any time we see a break above the pink-shaded area at the top of the chart – the resistance highs that we’re seeing right now. If we see a break above that, potential to rally all the way back up in towards 1.6700-level – that next historical resistance from the Weekly Chart for the GBPUSD.

 

Comments

comments