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I’m going to get started today on the Greater British Pound versus the US Dollar [GBPUSD]. Starting here on the Daily Chart, we can easily see that this currency pair has been in an uptrend for quite some time. We go all the way back into July of 2013, beginning of the uptrend, all the way down here into the 1.4800-level, as the market continued to climb over the past several months, pushing all the way up into the highest highs here on the chart into the mid to upper-1.6600s.
Now, in the most recent weeks, past several days, we’ve seen resistance up here. Pink-shaded area at the very top of the chart holding as our resistance underneath the 1.6700-level and now we see the market taking a turn back in the other direction, now pushing lower back into the mid-1.6300s.
A couple things of note here on the Daily Chart. First off, the longer-term trend line. The blue trend line coming from the lowest low, connecting with the low just before the high. That’s where I’ve connected the blue trend line. This low just before the highest high. And we could see the market has clearly, today, challenging underneath that blue trend line.
I’ve also taken a trend line – the red trend line – from the low here where the black X is in the middle of the trend. And I did that because it’s significantly a second leg of the trend. We could see the first leg pushing up and it went into a period of ranging or congestion here for a period of time in the middle of the chart and ending here where that black X is as it started the next leg of the uptrend and pushing into the highest highs. So I’ve taken a trend line – that red trend line – from that low where the black X is, connecting with that same low just before the highest high, and we could see that the market is challenging underneath that trend line also today as well as the market pushes back down here into the 1.6300s.
Also, two different distinct Fibonacci ranges measured here. I’ve also measured from that same black X. The low there where the black X is to the current highest high. We find the .382 fib right here at 1.6356. We’re challenging just a hair underneath that .382 fib from that trend range. The next retracement level down – the 50% retracement level of that same trend range happens to sit down here at 1.6260. That’s this orange-shaded area. The next shaded area down from the purple-shaded area that we’re currently holding in as support.
So, breaking through the purple zone, the next retracement level – 50% – sits down here at 1.6260, into the orange-shaded area. Next thing I’ve done is taken Fibonacci from the lowest low to the highest high. The lowest low all the way down here at the bottom of the blue trend line to the highest high. And we can also see Fibonacci overlapping right here into the orange-shaded area. It’s a little bit harder to see the number on the right-hand side of the chart, but if you look right in the middle of that orange-shaded area, there’s a dashed blue line. That’s the .236 fib of that longer trend range.
So, we have two different retracement levels. The 50% of the shorter range and the .236 of the longer range sitting right here into the orange-shaded area. That becomes our next support if the market is able to break through this purple-shaded area here for the GBPUSD.
Let’s go ahead and zoom it in a little bit here on the Daily Chart. Get a tighter view of everything we just spoke about. It doesn’t really change the outlook. Just gives us a tighter view. What I would expect today is if this continues to hold as support into the purple-shaded area, and I’m going to go ahead and put an arrow here. If it holds as support and the market has a difficult time breaking through, which if you look back here, that’s exactly what happened. It had a very difficult time breaking through here and started moving back up in the direction of the longer-term trend.
So, watching for support here into the purple zone like what we see back here. As long as it stays within or above it, potential to rally back higher. The next resistance, if it does rally higher, would of course be the two trend lines and that yellow-shaded area. We can look back in time again. Resistance, resistance back in time. The other opportunities here of course would be the breakdown of that same purple-shaded area. If it gets underneath it, of course we’ll expect the market to turn back down towards the orange-shaded area, where those next Fibonacci retracement levels will be down into that orange-shaded area.
Of course the Forex Black Book trend bar is red, and so we would expect that any opportunities to sell would be opportunities to trade in the direction of the Forex Black Book indicator, which is bearish bias right now. So, what I would actually prefer to see with the Forex Black Book and really technically is a rally back into resistance. A rally back to the yellow zone, back into the low to mid-1.6400s, challenge under the trend lines, and then the fall back down. And we’ll look at an example of a hook pattern that we may look for here on the GBPUSD when we get over the USDCHF.
Let’s go ahead and move this down towards the 4-Hour Chart. And as we get down here to the 4-Hour Chart, several days ago – well, last week, we saw the market holding just above those two trend lines. The blue and the red trend line here. See the market held just above those two trend lines for several hours and only breaking underneath as we see the open of the new week here for the GBPUSD and really the new month of February, because as we closed out last week, we were closing out January.
Zoom it out a little bit so we could see some further history. There, of course, is that purple-shaded area. And as I mentioned, within or above it, like what we see back here – similar to what we see back here -, potential for rallies back in towards the yellow-shaded area again. Really a serious break underneath here, which we didn’t see over the past several months. We’re going all the way back into December since the last time we were underneath the 1.6320-level, underneath the bottom of that purple-shaded area.
If we can see a satisfied break underneath 1.6320, which is the bottom of that purple zone, then of course we’ll look for it back down here towards the orange-shaded area. Bank flow levels over the past several weeks or several days has been capping out resistance. We could see them up here in the pink zone. They continue to fall over the past several days. I would expect today’s bank flow levels, the sell levels particularly, to be closer here towards the yellow-shaded area, where our black arrow is and our two trend lines.
I would expect the bank flow levels will be somewhere here into the mid to low-1.6400s later on today, when they are published. We may even begin to see buy levels come into the market. We could see the last time we saw buy levels was all the way back here into January 13. That was last time we saw a buy level. So, it’s been quite some time since we’ve seen such a dramatic dip lower. I might expect we could see those levels coming back in. Maybe not here in the purple zone. Maybe closer here towards the orange-shaded area for the GBPUSD today.
So, critical decision zone. If you’re looking to buy today, this is a very likely place that you might consider a buy. Staying within or above the purple zone, targeting back to the yellow zone. If you’re looking for a sell, maybe not there quite yet. It either needs to rally back into resistance or I think satisfy a break underneath 1.6320. Then we’ll look for the continuation back down towards the orange-shaded area.
A really good example of that, and I’ll just go ahead and point that out. I’m going to take this little red circle we see right here. I’m going to drag it over here to the left-hand side of the chart. Here’s a great example of the breakout pattern that we could be looking for. Left-hand side of the chart. Open and close under the purple zone. Challenge underneath the purple-shaded area – 1.6320 as resistance, and then it fell down to the orange zone.
So, take a look over here where this circle is on the far left-hand, lower left-hand side of the chart. How it opened and closed underneath the purple zone, tested as resistance, and then fell down to the orange zone. That is very similar to what I’d be looking for over here if you’re looking to sell it. So, watch for this pattern setup over here on the right-hand side for clues to potential selloff towards the orange zone. Otherwise, if it doesn’t do that, we could be looking for support just like what we saw the past three attempts into this purple zone and a challenge back to the yellow zone for the GBPUSD today.
