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I’m going to get started today on the Greater British Pound versus the US Dollar [GBPUSD]. Starting on the Daily Chart, long-term, going all the way back into June and July of 2013, this currency pair has been in an uptrend. Higher highs and higher lows can easily define that trend. In the most recent days though, we’ve seen a little bit of a change in that trend pattern. Let’s zoom it in to the most current timeframe.
We’re still on the Daily Chart. We can see that overall we’re still in the uptrend, but in the past few days, couple of weeks, we’ve seen a fall and a turnaround of that trend, falling from the highs up here towards the 1.7000-level and pushing back down here into the 1.6700s. The past four days have seen a rally or retracement of that downward move. We fell from the 1.7000-level, down into the 1.6700s. Now we’re back up into the 1.6800s, and finding resistance into this pink-shaded area. Not only are we finding resistance into the pink-shaded area, which has had historical resistance here. We also see that the market broke down through underneath side of that long-term trend line, so that gives us our second clue that we’re looking for a change of the trend.
Not only have we seen lower highs and lower lows being made from the highest high and the last low that we see over here in the green-shaded area. We saw a new low underneath there. We now see it holding underneath resistance and the blue trend line. So, those are two different clues of a potential change in the trend. Our third clue to a potential change in the trend would be the Forex Black Book trend bar down here. There’s several different trends that this algorithm looks at to define that trend bar at the bottom.
When it’s brighter red, all of those trends are in agreement to go in a particular direction, which is down. If it’s brighter green, they’re all in agreement to go up. If it’s the darker red or darker green, we expect disagreement between the trends. So, so far, this week we’ve seen agreement in the trends to be bearish. We could see that by the red bar at the bottom. So, that bearish expectation or bias in the Forex Black Book trend bar. The fact that we’re underneath the blue trend line from the long-term, going back to June and July of 2013. We’ve started to change the definition of the trend from higher highs and higher lows to potentially lower highs and actual lower lows, because we’ve broken underneath this green-shaded area.
All that giving me reason to believe that, at least at the current moment, I’m looking for sells on rallies into resistance. Resistance being the pink-shaded area, under the trend line. The blue-shaded area possibility. And then eventual a breakdown of support, the green-shaded area, and a continuation of the downtrend. Now, of course all of that will change if the pattern of the trend changes. If we start to see higher highs and higher lows once again, we begin looking for a new challenge of the highest high on the chart, back towards the 1.7000-level. So, for the day today, I’m looking for sells underneath resistance.
Let’s go ahead and take that information now down to the 4-Hour Chart. It gives us a little bit of a closer view of that pink-shaded area. And over the past several hours, we have seen some challenges, haven’t we? We’ve seen some challenges of that pink-shaded area, but the buyers unable to sustain a hold above the 1.6840-level, which is the top of that pink-shaded area. They took a quick spike above there, a quick challenge above there, all the way back up into the 1.6860s, and then a quick push back down into the pink-shaded area.
So, for the day today, we’re kind of looking at some congestion. I’m going to adjust this pink-shaded area a little bit to really define this area of congestion. I’m going to leave that one there and bring this one down to ab out right here. Let’s widen this pink-shaded area out a little bit. So, now we can see this entire area that we’ve been sitting in for a few days now as congestion. The pink zone, going between 1.6812 and 1.6840. We’re bouncing around in here. We really need to see a breakout, open and close breakout of this congestion.
If it breaks out to the topside, then yes, of course we’ll look for a continuation back to the blue zone. And of course a break above the blue zone, higher. If it stays underneath, we go back down here to the green-shaded area, which I’ll widen out that a little bit also. So, let’s put a couple arrows here on the chart to show us our expectations. Within or above, or if we get above the pink-shaded area, we’ll look for it to go back towards the blue-shaded area. Back within or below the pink-shaded area, we’re back down here towards the green-shaded area or lower. So, the blue and the green zone of course would be the next breakout, resistance, or support.
Something else that’s interesting here on the 4-Hour Chart is the bank flow levels that we see here on the chart. The past two days, we could see our bank flow levels going into Thursday and Friday. We could see yesterday’s bank flow levels also sitting right here into the blue-shaded area. These are yesterday’s levels from the 19th, and you could see them sitting right here into the blue-shaded area. So, I would suspect that today the bank flow levels would look very similar as they were yesterday. Right here, within or just underneath the blue-shaded area.
So, as long as those bank flow levels are capping the market, I think we’re still looking for sells on rallies to resistance and looking for a fall back down. We don’t see any buy levels for the bank flow over the past several weeks, so that gives me a little bit of a greater expectation to a bearish bias. So, bank flow levels, the trend line, lower highs, lower lows, the red trend bar, Forex Black Book – all of that giving us some bearish bias to the market right now. Selling on rallies into resistance, looking for breaks of support and a continuation of the downward pressure.
One last thing here on the 4-Hour Chart. Let’s take Fibonacci retracement measurements from the highest high down to the lowest low. Highest high, down to lowest low puts the .382 Fibonacci retracement level right at 1.6832. That’s right there at the top of our pink-shaded area, where the market is currently finding resistance. Interesting enough, yesterday’s spike, or not yesterday, but the previous candle, the previous 4-hour candle, the spike, taking a turn right back to the 50% retracement level. Exactly right at the 50% retracement level of the previous downtrend, and then falling back down. Fibonacci clearly showing us resistance also at the pink and the blue-shaded area, right there at the bank flow levels from yesterday.
So, 50% causing that resistance. Fall back down to the .382. A push from the .382 back down goes back to the .236, into the 1.6790s. Beyond there and beyond the green-shaded area, we challenge the lows back to the yellow-shaded area at the very bottom of the chart, into the low-1.6700s. Into this kind of resistance, I’m really discouraged about buying it, but more encouraged to sell it. Probably the only thing that changes that outlook for me would be a push above the blue-shaded area, above the .618 fib of that previous downtrend, all the way up there at 1.6894. If it breaks above there, we’re likely to begin focusing our efforts back in the buy side for the GBPUSD this week.
