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I’m going to begin the day today on the Greater British Pound versus the US Dollar [GBPUSD]. But first, as we begin trading for the US markets, you should be aware that many markets around the globe are still observing bank holidays, which could still affect liquidity and we could see irregular volatility today. So, keep that in mind as you go through your trading for the day today.
Now, going back here to the GBPUSD, we’re on the Daily Chart. We could see that this pair has been in an uptrend for quite some time. We’re going all the way back into July of 2013 as we see it here, but it actually goes a little bit farther back then that. Within the life of this trend, over the past few weeks, we’ve been observing these three ranges, if you will. These boxes that I’ve drawn here on the chart.
We go all the way back into September of 2013, and we can see the market was bouncing around between the orange-shaded area at the bottom of the box and the green-shaded area at the top for quite some time. Then, eventually, we broke out above that first box, and then we started finding support right around the same area where those previous resistance were within the first box and resistance into the next green-shaded area, up here closer towards the 1.6600-level.
We bounced around in that range or this box for quite a period of time. Then we finally broke out above there, back into February, and then we started bouncing around in here. Bouncing around between the highest highs, towards the 1.6800s, and the lows back into the 1.6500-level. So, over the past several weeks, we’re going, again, back into February 12, February 13th; we’ve been bouncing around inside this box.
Right now the market holding into the low-1.6800s. And we have a little green-shaded area at the top of the chart. We’ll zoom in on that here in a moment, but what I want you to see here is that we are still within the uptrend. You define an uptrend as having higher highs and higher lows, so we are still holding within that longer-term uptrend because we still see higher lows and we actually, most recently, over the past five days or so, have seen a new higher high made for this currency pair. The question is: are we going to see a continuation of the uptrend and a turn back towards the 1.7000, or 1.7100-level, or are we going to see a reversal finally and a little bit of a drawback as we challenge back towards the trend lines?
We don’t know that for sure, but we’ll definitely watch for a breakout just in case we see a push higher or lower for this currency pair. One interesting aspect here on the Daily Chart is that the Forex Black Book now has turned green. It’s been red for quite some time, as we’ve been bouncing around inside this range. With the bullish behavior we’ve seen last week, we see it turning green, which could, of course, lead us to buys on dips into support.
That’s really what you’re looking for here with that indicator. You’d prefer to see a dip down, support, and then the market turn in the direction of the bias, which is bullish or green right now for the Forex Black Book. So, I would actually prefer to see this take a dive down, maybe to the yellow-shaded area, maybe back towards the trend line, and then look for a new buying opportunity at a lower price level to give us a lower risk, higher reward opportunity to buy the GBPUSD at that point. So, that’s the way we’ll look at that Forex Black Book this week, but right now the market holding underneath 1.6800 as we speak.
Let’s go ahead and zoom it in here a little bit on the Daily Chart, and there is it. Over the past five days, holding underneath the top of that green-shaded area. This green zone will be our resistance for today and, well, as long as it holds within or underneath it, this green-shaded area, going all the way between 1.6780 and 1.6820. That’s the range that we’re looking at. It’s about 40 pips between the top and the bottom of that green zone, but I think it’s important to look at that entire zone as resistance.
You follow it back. You can see the spike to the top of it over here. You could see the spike to the top here. We could see the supports over the past four days right at the bottom. So, clearly the top and bottom of that green-shaded area has been resistance and support over the past several days. So, that’s our critical zone for this week. If we can open and close, break above it, we’ll look for the continuation of the uptrend. If it can’t and we start to see the market push back underneath 1.6780 or so, we likely look for the turn back down towards the yellow-shaded area, which I just mentioned as our next potential viable spot for a buying opportunity in the direction of the Forex Black Book. And of course that would also come in contact with two different trend lines. The longer blue trend line and a shorter red one that I placed here last week to represent just our last two lows. So that would be back down here towards the yellow-shaded area.
Let’s go ahead and take that information down to the 4-Hour Chart and get a little bit of a closer view. Last week we did see the market attempt to breakout above the green-shaded area on the 4-Hour Chart, but it was a false breakout. A short-term breakout, and then it turned right back down and got back to 1.6780 as our support once again.
Let’s go ahead and pull this arrow down a little bit, right to 1.6780-level. We can clearly see support here last week. An open and close, break underneath 1.6780, we’re likely back down towards 1.6730 or even towards 1.6700, back into the bottom of the yellow-shaded area. So, an open and close underneath 1.6780 today provides a potential short-term selling opportunity for the GBPUSD, targeting the yellow zone or lower. Staying within or breaking above 1.6815, 1.6820, the top of the green-shaded area, then that’s when we’ll be looking for it to continue that pressure back towards 1.7000, but I still would look for that breakout above 1.6815 on the Daily Chart.
I’m not really going to trust the breakout on the 4-Hour, like what we see over here. I’m not going to trust that, but I would likely be looking for that on the Daily Chart. So, for the day today, it’s my expectation that as long as it holds within or we get a break underneath 1.6780, I’ll be looking to short this back to the yellow-shaded area, into the low-1.6700s. The only reason I’ll begin buying the GBPUSD right now would be the dip to the yellow zone or a daily open and close above 1.6800 for the GBPUSD this week.
