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I’m going to begin the day today on the Greater British Pound versus the US Dollar [GBPUSD]. Starting here, on the Weekly Chart, I think it’s important for us to get a larger-term or larger-compression perspective of this of this currency pair just so we can understand what this currency pair has been up against over the past several weeks for the GBPUSD.
So, if we go up here towards the top of the chart, taking a look at this purple-shaded area at the top of the chart, that goes between the mid-1.6200s, around 1.6250 or so, all the way up into 1.6300. It’s that purple-shaded area. Follow that backwards in time, and I’ve placed a vertical dashed line at each point where I expect that we’ll look for historical resistance support. And you could see, of course, the last three times finding resistance here, here, and here. We also see some resistance close to that purple-shaded area, into the green zone here. Back into October of 2011, many times finding resistance underneath that purple-shaded area.
We can even see a few times finding support on top of it. Once it got on top of that purple-shaded area, it found support, even going all the way back here into 2019. So, many times, surrounding this purple-shaded area as resistance and support. And most recently, of course we have been underneath it as resistance. Now you bring that over to the current timeframe and, over the past several weeks, we’ve seen multiple challenges of that purple-shaded area as resistance once again.
Let’s go ahead and take that information down to the Daily Chart and begin developing a more closer perspective for this currency pair. And there’s that same purple-shaded area at the top of the chart that we were just looking at on the Weekly Chart. And now we can see that, over the past several weeks, we’ve seen two distinct challenges of that purple-shaded area. The first time coming up here into the beginning of October. We challenged all the way up there into that purple-shaded area, into the 1.6250s. We made a dip down. Then, once again, we’ve come back up into October 22nd or so and made another challenge of that purple-shaded area. Both times unable to breach above the 1.6250-level and falling back down.
So, we may be developing what we will interpret as a double-top reversal pattern. So, to confirm that of course we want to see a change in the trend pattern. So, double-top potential here and potential change of the trend pattern. The trend, over the past several months, has been bullish, and that’s easy to identify using that red trend line. We can visually see we’ve been in an uptrend. The price pattern has been higher. I determine an uptrend as having higher highs and higher lows. That’s the easiest way to define an uptrend.
Specifically, the higher lows is what we’re looking at here within an uptrend, as the market continues to rise. What’s going to give us an expectation of a change of that pattern is when we see a new lower low, and we haven’t seen that quite yet. Now, on the smaller compressions – the four, the one, the 30-min. If we go down to the smaller compressions, of course we’ve seen new lower lows. But when we’re looking at these larger compressions, like the daily, to determine a longer-term trend perspective, we have not actually seen a new lower low. What’s very interesting though today is that we are seeing break of some shorter-term support into this blue-shaded area. We’re also seeing the fact now that we are underneath this red trend line. All good clues to potential trend change and trend reversal for this to continue to be bearish from the challenge of the double-top, all the way up there into the purple-shaded area.
If it continues to stay underneath this blue-shaded area today, the next supports that we can easily see here on the Daily Chart will be down here into this pink-shaded area where these last support lows are. And guess what. If we break underneath those lows, we will finally see a new lower low, and that will begin to give us further confidence in a trend change and a continuation lower for the GBPUSD.
Now let’s take that information down to the 4-Hour Chart because that’s a wider view. The weekly and daily are wider views and it gives us a wider perspective of the pair, but we want to use some closer charts – the 4-hour, the 1-hour – to determine a strategy for the day. How will we be trading this currency pair today? Well, this blue-shaded area, over the past couple of days; and you know, it’s not too hard to see it has held as support inside this blue-shaded area for a few days. We’ve bounced on it. Bounced back up. Bounced on it. Bounced back up. We challenged underneath the red trend line yesterday, providing a short-term opportunity to go ahead and take a sell, if you weren’t already in a sell, into that red trend line, as it hooked up back underneath it and now we’re seeing the challenge and the push now underneath that blue-shaded area.
So it’s my expectation today that as long as we stay underneath that blue-shaded area, we’re going to look for the continuation lower, all the way down to this pink-shaded area. This becomes our target for the day back down into the 1.5900-level. That pink-shaded area, I have highlighted here, between 1.5890 and 1.5914. It’s about a twenty to thirty-pip zone highlighted in pink down there. But if you follow it backwards in time, we could see some critical support here. This is where the market found many days finding support along that pink-shaded area. That becomes our next area to really look for our support for the GBPUSD.
Staying under the blue zone, we go back to the pink-shaded area. If it gets back above the blue-shaded area, of course, challenging back to the red trend line or even back up into this green-shaded area is a possibility. So, what our hope for today, especially if you’re already in a sell or you’re looking for a new opportunity, is that it stays under the blue-shaded area; continues falling all the way back down to the pink-shaded area. In no way, at least at the current moment, am I looking to buy this, because we haven’t challenged into support. Remember: buy low, sell high.
If you’re looking to buy a currency pair, the lower it gets, the better. If you’re looking to sell a currency pair, the higher it gets, the better. So, at this point, I’m not looking to buy it because I think we need to see it get lower, back down into support, back down into that pink-shaded area. So, not looking to buy it today because the trend is moving down. The momentum is moving down. We’re breaking through what was support here into the blue-shaded area, which will now, especially if we see an open and close underneath it, become resistance. So, as long as it opens and closes or stays underneath the 1.6000-level, I’m continuing to focus my efforts on the sell side.
Forex Black Book confirming that with the red trend bar. If we get any new red or yellow sell arrows with the Forex Black Book, it gives us confidence to go ahead and jump into a sell once again here for the GBPUSD. So, once again, the expectation today: staying underneath the blue-shaded area, underneath 1.6000. Selling, targeting back down to the pink-shaded area. The only reason I would even begin considering a buying opportunity is a challenge back into the pink zone or a turn back above the blue-shaded area and above the 1.6035-level today for the GBPUSD.
