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I’m getting started today on the Greater British Pound versus the US Dollar [GBPUSD]. Starting here, on the Daily Chart, left-hand side of the chart, we can easily see this currency pair was in an uptrend. We began the uptrend all the way down here into the 1.4825-level, at the bottom left-hand side of the chart, back in July of this year. We began the uptrend and started creating higher highs and higher lows. Until the market capped out here into the mid-1.6200s – the purple-shaded area at the top of the chart – we see two distinct resistance highs into that level. You could see here, into October 2nd, we challenged here into that purple-shaded area – the 1.6250-level -, a little bit of a dip, then a rally and a rise right back into that same level, right around October 22nd.
Since then, we’ve seen a little bit of a fall and a break underneath that bullish blue trend line. We could see the blue trend line coming up from the bottom, between the lowest low and the highest highs that we see on the chart. The market has now broken underneath it, challenged back underneath it as resistance, fell back down, found support, and now we’re right back up into the low-1.6100s, into this green-shaded area. Now, since then, since we’ve been bouncing around for the past several months, we go all the way back into September 16, this vertical, dashed black line that you see over here on the middle, left-hand side of the chart. Around September 16, since then, we’ve been bouncing around between support lows into the pink-shaded area and resistance highs, of course, into the purple-shaded area.
We’ve also, within that timeframe, between the pink and purple-shaded area, found resistance into the green-shaded area and resistance and support into the blue-shaded area. So, we’ve gone into bit of a range. An area of consolidation, where the market hasn’t continued the uptrend and made a new higher high and it hasn’t turned into a downtrend and made new lower lows. We’ve gone into a range from the pink zone to the purple zone. Right now, we’re up towards the upper end, or upper section, of the range, into the green-shaded area, and we have been for five days now. Five days we’ve been holding in this area of congestion inside this green-shaded area. That green-shaded area goes between right around the 1.6100-level to 1.6135. And again, you can see the past four or five days finding resistance and support within that area of congestion – that green-shaded area.
So, what we need to see is a breakout. We need a breakout either above the green zone to continue to the top of the longer-term range, back up towards the purple-shaded area, or a breakout below the green-shaded area. Below 1.6100 looks for the reversal and a turn back down towards the bottom of the larger-term range. We could see that the Forex Black Book is red. Red means that there’s a bearish bias to the trend, and we could see it’s red right now. It is dark red, showing that the shorter-term trend has been against the longer-term trend. So, the overall trend for the past several weeks has been bearish. That’s why the trend bar is red.
Now, over the past few days, the past week or so, we have seen a little bit more than that. About a week and a half, we have seen some bullish movement. That’s the reason it’s dark red. If we get a breakdown that starts to move down again, we could look for this trend bar to turn bright red again, as it continues to pressure back down towards the bottom of the range. If it doesn’t, continues to break higher above the green zone, towards the purple zone, over time, we might even see this trend bar turn green again. So, definitely something to pay attention to. For the time being, I think what we need to do is wait for a breakout. For the past four days, we’ve been stuck in this area of congestion, inside this green-shaded area. And confidence will come, I believe, on an open and close outside that green-shaded area, and I believe it will be here, on the Daily Chart, to give us our highest degree of confidence.
If we go down to the 4-Hour Chart, we’ll see that there have already been some opens and closes outside that green zone, which gives us a little bit of hesitation to watch for it on the 4-Hour Chart, because we’ve already seen it and now it sits right back inside there, and we’ll look at that in a moment. The main focus here, for me, will be an open and close outside the green zone on the Daily Chart. Similar to what you see back here. It finally opened and closed above it, continued to the purple zone, opened and closed below it, continued to the pink zone. So, this is a critical decision point. Five days now holding as resistance into this green-shaded area. It’s not too difficult to see that back in time it could take five or six days before the market breaks out of an area of congestion. Just follow it back here. We go back here, where it settled down on top of the pink zone. Six days. It took six days; settled down on top of the pink zone before it made its reversal.
You go back here, into the blue zone. Six days before it found support enough in the blue zone to continue the trend, as it made a new higher high. So, it’s not out of the ordinary where we see five or six days. Here into the blue zone, here into the pink zone, even here into the green zone, where it finds support or resistance before finally getting some motivation to move in a direction. So, five days is not out of the ordinary to go into a period of congestion. We need a breakout for a continuation of the trend, either higher or lower.
Let’s go ahead and take this down to the 4-Hour Chart. And this is what I mean. Over the past several hours, we have seen an open and close. Actually, two candles open and close underneath that green zone, and now we’re right back up into that green zone. So, I think the Daily Chart will give us higher amounts of confidence in that breakout. If you would just assume that 4-Hour Chart was the breakout, you’re, right now, wondering what’s going on because it’s right back up into the top of the green-shaded area. I continue to focus my efforts in the sell side or the bearish side because the trend bar, the Forex Black Book, we’ve broken underneath that blue trend line from the Daily Chart. We’re underneath it right now. And the bank flow levels here on the 4-Hour Chart have been capping out the highs.
It’s been giving it difficult time breaking out above the green zone. Look at yesterday’s bank flow levels and yesterday’s market. It came up into the bottom of the bank flow levels, which was right around the 1.6175-level, and then immediately fell off of it. So, we saw a fall from the bottom of the bank flow levels about 100 pips down. So, the bank flow levels over the past five or six days have been capping the resistance and not allowing the buyers to keep control of this currency pair, and we see the sellers step back in. If today’s bank flow levels are similar or lower than yesterday’s, right on top of that green zone, as they were the previous days, then, again, it gives us higher amounts of confidence of resistance and the greater expectation that we’re looking for this to go back down. If today’s bank flow levels come out all the way up here into the purple-shaded area, that completely changes the picture and then we’re likely looking for the breakout above the green zone.
So, again, confidence will come in direction on a breakout of this congestion on the Daily Chart, either above or below the green zone. We’ve already seen it here on the 4-Hour Chart. Let’s wait for some more confidence on the Daily Chart. We need a catalyst to drive this. I think I’m focused on the sell side because of the red trend bar, the bank flow levels, and the break underneath the blue trend line on the Daily Chart. If the market challenges the bank flow levels again today, if they come out and they’re down 1.6160 down to 1.6135 – similar to what they were two days ago or even where they were yesterday -, I’ll be looking for a selling opportunity into the bank flow levels, as the market has continued to cap into those levels for the past several days and the GBPUSD.
