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I’m going to get started today on the Greater British Pound versus the US Dollar [GBPUSD]. Starting here on the Daily Chart, taking a long-term view of this currency pair, we could see it’s been in an uptrend for quite some time. We go all the way back into July of 2013. We began the uptrend.
Now, I define an uptrend as having higher highs and higher lows. That really is the price action within the trend. The trend lines themselves are just tools that we use to identify the trend. So, we could see the blue trend line identifying the longer-term trend line. The red trend line here is up towards the top right-hand side of the chart, identifying a shorter leg of that trend, starting from the low here in the middle of the trend, going to the low prior to the highest highs. So, both of those trend lines connecting with lows within the trend and the last low before the highest high, because that highest high essentially is where the uptrend ended.
The price action ended there. Higher highs and higher lows ended right there. And in the most recent days, we’ve seen a little bit of a pullback as the market started coming right back down. It’s now broken underneath both of those trend lines. So, no matter how you draw them, it’s now broken underneath those two trend lines. Shorter and longer one. We’re also now seeing the market come back up and challenge underneath resistance, and that’ll be easier to see as we zoom in on smaller compressions, but I just want to see this overall viewpoint first.
We’re now underneath the trend lines, coming back to test underneath those trend lines and into resistance. We could see that we’ve changed the pattern of the trend. Look down at the bottom of the chart. We could see that the Forex Black Book is dark red right now, showing a little bit of disagreement in the trends. Longer-term and shorter-term, as we’ve seen the past four or five days going up a little bit here for the GBPUSD. But overall it’s still red and bearish because we have seen the market, over the past couple of weeks, going back down.
Let’s go ahead and zoom in one time here on the Daily Chart. I’ve also taken a couple of Fibonacci measurements here. Fibonacci from the low where the red trend line starts at the bottom left to the highest high, and Fibonacci from the highest high down to the most recent, current low that we could see here. And in doing that, we find a couple of overlaps. Here’s an overlap right here. If you look to the right-hand side of the chart, the numbers – the blue numbers – are on top of each other. That shows us that there’s some Fibonacci of both of those ranges overlapping right at the top of the pink-shaded area.
That will be support. Of course as long as it holds there, on top of there, we could look for support and the market to go back up. Then, of course, we see some overlap here into the yellow-shaded area. Just above the current market you could, again, look to the right-hand side. We could see the 50% of the shorter range. .236 of the longer range sitting there, closer to that yellow-shaded area. But right now we’re sitting right here at the .382 Fibonacci retracement level. 1.6410 of the short down range, and that’s over the past three days, where we have currently found resistance for the GBPUSD.
So, resistance is the green zone. Support will be our pink zone. The next resistance of course is the yellow zone. And just underneath the pink-shaded area of course will be our next support where the market, several days ago, found support here into the upper-1.6200s. The blue-shaded area will be our next area for support.
Now that we see all that, let’s go ahead and take that down to the 4-Hour Chart. Of course there’s the same trend lines that we were viewing on the Daily Chart. There are our same highlighted areas. The yellow-shaded area will be our next resistance. That happens to sit where the Fibonacci levels are and the trend lines sitting there into the yellow-shaded area. The green-shaded area is critical right now because that’s where we’re currently finding resistance – under the .382 fib of this last down range. 1.6410. That’s where the market is holding as resistance.
Staying within or underneath that, we look for a turn back down in the direction of the previous down. That’s the current downtrend that we’ve been in over the past several days. Red trend bar for the Forex Black Book. If we see a new red arrow, then that gives us confidence that this will be having some further momentum lower. If you just take a look at where the red arrows come, they come in after the market has rallied higher. A rally higher, a red arrow, and then we began a fall.
So that’s what we’re looking at now. We’ve seen a rally higher into resistance. Now we’re looking for the next fall. The next, of course, support is the pink-shaded area. Then of course underneath there, we’ll look for a continuation of the downward move. Remember, within a downtrend, what we’re looking for, is lower highs and lower lows. So, previously we’re in an uptrend. We look at that first off on the Daily Chart. Now we’re starting to see some bearish momentum, and what we need to see is the creation of that pattern of a downtrend. Lower highs and lower lows.
So, this rally higher that we’ve seen over the past two days or so is not really terrible because we do need to see a lower high. It needs to create a high, right? It needs to have a high point and then make a new lower high point. So, just like up here, where we saw a high at the highest high and then a new lower high up at the top left-hand side of the trend, we’re now seeing a new lower high being established here into the 1.6400-level. So, it’s my expectation, within here or maybe even a challenge to the yellow-shaded area, we’re still looking for resistance and for this to turn back down.
Now, if it does break above 1.6410 today, we’re likely seeing 1.6460, 1.6470, and 1.6480 back up here into the yellow-shaded area. That could provide an intraday opportunity. Next I want to look at the bank flow levels. The past three, four, five days the market has been sitting underneath the bank flow levels, under the pink-shaded area. Of course we saw a little bit of a rally higher. The bank flow levels from Friday sitting right here in the green-shaded area. If we see similar bank flow levels today, they come usually around 9:45 to 10AM Eastern time. If we see similar bank flow levels today, into the top of the green zone or maybe even into the yellow zone, we’ll once again be looking for resistance and the possibility of this turning back down.
So, it’s my expectation today that I’m primarily going to focus on selling into resistance or breaks of support in the direction of our current bearish trend that we’ve been in. Now, all of that will likely change, and I’ll change my overall focus and perspective, if the market breaks the yellow-shaded area and gets back above these trend lines. If it gets back above the trend lines, we’re probably looking for another challenge of the highest highs that we see here on the chart, all the way back up into the 1.6600s. So, that will be kind of a critical decision point for the GBPUSD this week.
Staying within or underneath those trend lines, I’m going to focus on selling into resistance or breaks of support. If it breaks above the trend lines, all that goes right out the door and we’ll look for a continuation higher for the GBPUSD. So, selling into resistance, yellow zone. Maybe here in the green zone. Watching for bank flow levels today to help us give us confidence in the resistance and the accumulation of sell orders in the market. Breaking the pink zone, we challenge the blue zone. Breaking the blue zone, we’ll continue the downward trend for the GBPUSD this week.
