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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, over the past few weeks, we’ve been studying resistance into this purple-shaded area at the top of the chart between the 1.6250-level and 1.6300-level. That has been our resistance. We follow that back in time and, over the past several weeks, we’ve studied the historical resistance in that zone. Here, back into December of 2012. A little bit further back in into September of 2012. Even a little bit further, back into April of 2012. We could see our last three resistance highs into that purple zone. And of course that, over the past several weeks, has been our resistance.
Now we see a little bit of a change, where the market has pushed through that purple-shaded area and challenged to the next level of resistance, which is this yellow-shaded area at the very top of the chart. That yellow-shaded area goes from about the 1.6440s, back up to the 1.6490s. So, about a 50-pip zone between the 1.6440s and 1.6490s, give or take a few pips on the top and bottom of that zone. This is the Weekly Chart. So, if we follow it back in time, the yellow-shaded area at the top of the chart, we could see back here into – we’re looking all the way back into July of 2011 and even into August of 2011. We could see our last time we were here we found resistance. Multiple weeks finding resistance and a reversal from there.
We go back a little bit farther into May of 2011. You see resistance. We did see a little bit of a push above it here, but then you continue to follow that yellow-shaded area back in time; we could see historical congestion, resistance, and even some support back, all the way back into 2009 on the far left-hand side of the chart. So, this yellow-shaded area – all that to say is our current resistance for the GBPUSD, where, last week, the purple-shaded area is now the yellow-shaded area. So we’re looking at resistance into the yellow zone. That purple-shaded area, which was our historical resistance last week, now becomes our support zone.
So, the purple-shaded area is support. Yellow-shaded area is resistance this week. Let’s take that information down to the Daily Chart. Now we could see that purple and yellow-shaded area here on the Daily Chart – very top of the chart. And we could see the market has already, one time, challenged up here towards the yellow-shaded area into the 1.6440-level. So, it’s already challenged there and found some resistance, falling back now into the 1.6300s once again. What we’ll watch for now are clues to reversal. Obviously this pair has been in a long-term uptrend.
We can see the trend line. I’ll go ahead and put this trend line here, from the lowest low to this low here, right before the current high. Let’s go ahead and change that to a different color. Let’s make it the blue color to represent that longer-term trend that we can see there. And even in a shorter-term trend this will be more apparent as we get down to the 4-Hour Chart, but even the shorter-term trend has been up. So, we’ve been in it for a long time. So, as we challenge into resistance, it doesn’t become an opportunity really to buy it, but more likely looking for indications of reversal.
If this yellow-shaded area becomes resistance like the purple-shaded area did, we could see several times challenging into it and bouncing off of it. So, watching for clues to reversal on smaller time compressions can be an opportunity to trade this currency pair. Looking for candlestick formations, somewhat like a shooting star candlestick or an engulfing candle, as it reaches the yellow zone becomes clues to reversal. Break underneath that short-term trend line. If it gets underneath this short trend line, that could also be a clue to reversal. Lower highs and lower lows. So, that’s something that we’ll watch as it approaches the yellow zone.
We don’t want to buy it into the yellow zone, but our best opportunities to buy it would be on dips into support. And we now know that this purple zone is support. So, our opportunities today for the GBPUSD exist here. We look for potential buying opportunities as it dips into support, the purple-shaded area, into the mid- to upper-1.6200s, or potential reversal indicators as is challenges all the way up towards the yellow zone at the very top of the chart and looking for resistance into that level.
Now, obviously, there are opposing views also. It could break under that purple zone and continue to go lower as it continues to reverse and go lower, or it could break above the yellow-shaded area and continue to pressure higher. So, we also have to have our risk assessment in that scenario. If we sell it into the yellow zone, there’s the risk that it breaks and continues to go higher. If you buy it into the purple zone, there’s the risk that it breaks and continues to go lower. So, that is your risk in this scenario. So, if you’re looking to buy it, your lowest-risk opportunity is waiting for it to reach the purple zone. If you’re looking to sell it, your lowest-risk opportunity is to wait for it to reach the yellow zone to sell it. If you’re looking to buy it, the dip to the purple zone or a breakout above the yellow zone. If you’re looking to sell it, a rally to the yellow zone or a break underneath the purple zone. Those are our lowest risk, highest potential reward opportunities for this currency pair as it stands right now.
Let’s take this down to the 4-Hour Chart. And as we get down here to the 4-Hour Chart, let me go ahead and squeeze this out. It was tightened in. We bring this into the yellow-shaded area. There’s our yellow zone. We’re watching for clues to reversal. Of course a break above it, we look for it to go higher. Your best opportunity to buy it will be dips into support, into the purple zone, or a break underneath to go back down again towards the bottom trend line. Let’s go ahead and make sure this trend line is connected exactly to the lows of that trend as we would want it to be. And this one also connected to the low of that trend, as we want it to be. So, those become clues to support.
So, challenging into the 1.6300, 1.6290s becomes potential support. Challenging into 1.6440s, 1.6450s, into the mid to upper-1.6400s becomes our resistance. Your best lowest-risk opportunities exist at those two shaded areas. Purple and yellow-shaded area today for the GBPUSD. We do see, over the past several weeks, the market challenging into the bank flow sell levels, even going into late last week. We could see the bank flow levels here on November 29 sitting here at the top of the chart. The top bank flow level was 1.6397. We do see that over the past several hours the market has spiked above last week’s bank flow levels, which is not out of the ordinary in an uptrend. As we look for new bank flow levels today, I would suspect that they’ll be somewhere here into this yellow-shaded area.
As they’re published later on today, that would be my expectation; is that we’ll be somewhere here in the yellow-shaded area, looking for sellers to cap this market. Hold it from going higher. Again, looking for clues to reversal will be your main object here from the yellow zone to go back to the purple zone. I think if you’re looking to buy it, you’re waiting to buy as it dips all the way back down towards the 1.6300-level for the GBPUSD today.
