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I’m going to get started today on the Greater British Pound versus the US Dollar [GBPUSD]. I’m going to start all the way out here on the Weekly Chart because I think it’s important for us to get a longer-term picture for this currency pair to really understand what’s been happening over the past couple of months.
The first thing I want to point out is the previous long-term trend. We can see the uptrend starting all the way back here in July of 2013, moving up from down here towards the 1.4800-level at the bottom of the chart, all the way up over a several-month period going into July of 2014, so about a year we moved up all the way up here towards the mid to upper-1.7100s, close to the 1.7200-level. So, quite a long uptrend.
Taking Fibonacci of that uptrend, that year-long uptrend. Taking Fibonacci retracement levels of that trend puts the .382 retracement level right here at 1.6280. That’s right at the top of this little green-shaded area towards the middle of the chart. That’s important because that is where the market has found support. Even though over the past couple of months we’ve seen a strong downward push, we found support at the .382 retracement level of this previous uptrend, which is only really a portion of a retracement of this previous uptrend.
So, there’s still the possibility that we see a turn back in the direction of the previous uptrend. We turn back up again even retracing much of the most recent downtrend that we’ve seen right now for the GBPUSD. Yes, it could continue to break lower, but it will indeed have to break through that green-shaded area, likely through the mid-1.6200s before we could see a continuation lower here for this currency pair.
Now that we see that, let’s actually zoom it in a little bit here on the Weekly Chart, and you could see over the past couple of weeks we’ve seen a dramatic price action here on this currency pair. Of course the dip all the way down here in towards the 1.6100-level, into the 1.6000s. A turn back higher. A rally all the way back up here into 1.6500. So, quite a wild move from the lows down here into the mid-1.6000s, up here towards the 1.6500s over the past two weeks, leaving a hammer candlestick over here two weeks ago, almost an inverted hammer here, where we saw a long wick on the top, small candle body on the bottom, and now we’re starting to see that move higher.
Two trend lines on the chart. The most recent downtrend and the most recent upward move that we’ve seen here for the GBPUSD. Now let’s zoom it back out. Take it down to the Daily Chart. There’s our two trend lines that we just pointed out. There’s the .382 Fibonacci retracement level that I pointed out from the Weekly Chart down here at 1.6280, down here towards the green zone. We’re above that right now. We’re challenging resistance in the blue trend line. Resistance is the orange-shaded area.
If I zoom it out just a little bit more, we can follow that orange-shaded area back in time. You could see the support, congestion back here, along that orange-shaded area. If it gets above it, where does it go? Just look back here in the past. Don’t look over here. Look back here in the past. If it gets above the orange-shaded area, where does it go? To the pink-shaded area. Not too hard to see that. So, that would be our next resistance.
Let’s zoom it back in. Getting above this pink-shaded area, a breakout above the trend line, a breakout above the orange-shaded area, we’re at 1.6380, 1.6385. We’re likely looking for at least back into the mid-1.6400s, if not towards 1.6500, which is the pink-shaded area right here. If it turns around, goes back down, stays resistance under the blue trend line, we could be looking for it back underneath 1.6340, which leads us back down towards the green zone, which is all the way back down here into the mid-1.6200s. So, these are your three areas – the orange, the pink, and the green – to watch for, and of course the trend lines will tell us which direction this is going to go.
If it breaks above the blue line, we’re going to follow the red line higher. If it stays under the blue line and breaks under the red line, we follow the blue line lower. Let’s take another fib from the highest high on the chart, which is this high up here, down to the current low that we see here. That puts the .382 retracement of that long trend there right at 1.6486. That is the pink-shaded area, by the way. Top of the pink-shaded area. .382 of this downtrend. So, that of course is telling us that there’s a high probability of going there.
Let’s take it down to the 4-Hour Chart. Let’s go ahead and take it down here to the 4-Hour Chart and let’s just take Fibonacci of the most recent downtrend leg, from this high up here, top of the chart, down to the current low. And that puts the 50% at 1.6047. It’s above that right now. .618 sits at 1.6417. We’re challenging close to that now, but the .786 and .886 are all the way back here above the pink-shaded area. So, not really entirely beneficial there, but we definitely see some potential upward movement.
One more fib, and I know it’s a lot of fibs on the chart, but one more. Let’s take this uptrend here. We could see bottom of the orange-shaded area clearly shaping up to be a support right now. If it breaks out under that orange-shaded area, you see the fibs there at the bottom of the orange zone. If it breaks out underneath there, the green zone becomes your next target and you could see the fibs down there. Moving higher, a little bit of resistance into the 1.6413-level, but above that we’re back to the top side of the pink-shaded area. So, for the day today I’m watching for a breakout. A breakout above this orange zone we look for the starting of a push back into the mid-1.6400s.
If it stays above 1.6385 today, opens and closes above this orange zone, I think we’re looking for the pink zone. The risk there is that it pushes back underneath the orange zone. I don’t think I would sell it right now. Too much bullish price action. More likely it is for the intraday. We’re buying on top of 1.6380, looking for the open and close above that, targeting back to the pink-shaded area. Underneath the orange zone would be the risk. If it breaks under the orange zone, we target back down to the green-shaded area.
Buying on dips to support, 1.6340 or so, bottom of the orange zone still a possibility if it takes a dive back down into there. Otherwise, open and close above 1.6380, we’re targeting again back to the pink zone. Bank flow levels yesterday. We’re challenging right into them right now. They’re a little old, but they’re definitely there. I would suspect today that we could see these bank flow levels take a push back towards the pink-shaded area. With the bullish price action we’ve seen, it wouldn’t surprise me to see the bank flow levels today closer to the pink zone and into the mid-1.6400s. We’ll have to wait and see of course, in several hours from now, where those bank flow levels will be, but let’s pay attention and watch out. I think they could be up here into the pink zone given the price action we’ve seen.
So, buying, targeting the pink zone will be a possible opportunity today. Under the orange zone is your risk. Getting back under the orange zone, red trend line, we’ll target back down to the green zone for the GBPUSD today.
