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I’m going to get started today on the Greater British Pound versus the US Dollar [GBPUSD]. As we view this currency pair on the Daily Chart, we could see it’s been in an uptrend for quite some time. We go all the way back into July of 2013. Started all the way down here into the 1.4800-level. Over the past several months, has climbed all the way to the cap high into the 1.6800s.
Now, over the past few weeks, we’ve seen a little bit of a change of the uptrend, where, within the uptrend, we saw higher highs and higher lows through the life of the trend. Over the past few weeks, basically starting at the highest high in mid-February, we’ve seen a little bit of a change as we see lower highs developing and lower lows developing for the GBPUSD.
After making a low here into this yellow-shaded area where the red trend line is, right about the mid-1.6400s, we’ve seen a little bit of a retracement and rebound back higher as it pushed back up here into the mid-1.6600s. Let’s go ahead and zoom in a little bit so we could see this area a little bit closer. There is that little bit of a downward pressure that we’ve seen here. Lower highs. Lower lows. We’ve seen the retracement. This purple-shaded area is clearly the area that we want to watch for today.
Five days. Five or six days we’ve seen the market holding here inside this purple-shaded area, between 1.6617 and 1.6660. That’s the purple-shaded area you see highlighted here. Historically this zone is significant also. You go here in this timeframe. You could see eight or nine days holding as congestion within here, eventually breaking to the bottom side and continuing lower. Follow it back a little bit further. You see congestion and support inside this purple-shaded area for, again, about an eight or nine-day period, and then pressuring back higher into the yellow-shaded area.
Follow it even further back. You could see over here on the left-hand side of the purple zone. You see historical resistance. So, this purple-shaded area historically has been an area of support, resistance, and congestion for the GBPUSD. And once again, here we are inside that zone for the past four or five days. The question is: which direction is it going to go? Is it going to continue to pressure higher in the direction of the most recent momentum, as it’s been pressuring back up from the mid-1.6400s, or are we going to turn back down in the direction that we’ve been going since mid-February?
And of course we can’t really know that for sure, but we can have some speculation and we can look for lower risk, higher reward opportunities. So, if it’s going to continue to pressure higher, the best thing that we can look for at this point is a breakout of the congestion zone to the upside. Basically, at this point, 1.6660 is the top resistance within our congestion zone. Above 1.6660, we likely look for the push back to the yellow-shaded area and back into this bearish red trend line that we see at the top of the chart.
The bottom side. If we’re going to look for it go back down and starting continuing back bearish pressure for the GBPUSD, we would look for the breakout underneath 1.6617, 1.6620 – the bottom side of the purple zone. Then we look for a continuation back lower, back down into the 1.6500s and a challenge of the lower lows for the GBPUSD.
Forex Black Book trend bar has been red for the past several weeks. We could see it down here at the bottom. It is dark red simply because the market’s been pressuring higher over the past several days. So it turned dark red because the shorter-term trend is in disagreement with the longer-term trend that we’ve seen since the highest high at the top of the chart. It was going down, down, down. Now we’re seeing some upward pressure. That’s why it’s dark red. If we start to see some bearish pressure again, we could see that trend bar turn bright red again, or if it continues to pressure higher, over time we could see that trend bar turn green again. So, right now it’s still red, signifying the overall pressure is still down, but we can see some shorter-term pressure pressuring higher right now for the GBPUSD.
Take all that information down to the 4-Hour Chart. And here we are stuck inside this purple-shaded area over the past several days. We see some contraction for this currency pair. Lower highs, higher lows. We definitely would be looking for a breakout of this purple-shaded area before we can have confidence in a singular direction, either higher or lower.
Breakout to the bottom side. Let’s go ahead and put an arrow here. Breakout to the bottom side at 1.6617, we’ll look for the bearish pressure to continue. At this point, if we breakout to the top side of this purple-shaded area, we’d be contending with quite a bit of resistance pressure, but a push above there pressures back into the 1.6700-level or even into 1.6735 – the top of this yellow-shaded area. Underneath the current market, of course down here into the green zone, we do see a little bit of support down here between 1.6585 and 1.6555. But a clear break underneath there, we look for the targets back down here into the yellow-shaded area.
As we’re here on the 4-Hour Chart, we have one last indicator that we can look at here, and that is the bank flow levels. If you take a look at our bank flow levels over the past four days, we could see the market holding those sell orders right here, just above our purple-shaded area. So, that gives us a little bit of a higher bias right now, I think, to the sell side because the bankers, the larger players in the market have accumulated sell orders just above the current market. And you can see, if you just go back to the left-hand side of the chart and notice what happened the last time this was like this, where the market was sitting in the purple-shaded area, we could see the bank flow orders sitting just above the purple-shaded area and then it started working its way back down.
So, again, here we are into the bank flow levels, similar to what they were back here on the left-hand side. As long as it stays underneath there, there’s potential resistance and selling opportunities. So, I think your two selling opportunities for the day today come at the top of the purple-shaded area, into the bank flow levels. You can see where yesterday’s level began at 1.6669, all the way up towards 1.6697. Those were yesterday’s levels. We’ll look for today’s level. I suspect that it will be very similar to yesterday’s or maybe even a little bit lower like they were the day before, just to the top side of the purple-shaded area. As long as we don’t see a strong pressure higher before those levels are released, we’ll likely see those levels in the same place.
So, as it touches the top of the purple zone, the bank flow levels, that becomes a selling opportunity for us on the GBPUSD. The other opportunity would be a break underneath 1.6617. Remember: buy low, sell high. So, as it reaches into resistance, that becomes your lowest risk opportunity because the stop becomes smaller. If it breaks support, that same support, which is the bottom of the purple zone, then becomes your resistance and you would sell underneath that purple-shaded area.
So, breaking under the purple zone or challenging the top of the purple zone are your selling opportunities. Your risk in both of those scenarios is that it breaks to the top side of 1.6660 and continues to pressure higher to the yellow zone. There’s risk in every scenario. You could just as well buy it here and it turns around and goes back down, but I think right now, with the bank flow levels here, the pressure is to the bearish side. The Forex Black Book pressuring in that direction also.
One last thing. Take a look at yesterday’s bank flow buy levels all the way down here in the bottom yellow-shaded area. So that tells me that the pressure right now is on the sell side. We have the sell levels here. The buy levels are very far away, so I expect that the market is looking to pressure all the way back down towards the 1.6400s for the GBPUSD this week.
