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I’m going to begin the day today on the Greater British Pound versus the US Dollar [GBPUSD]. I’m starting all the way out here on the Weekly Chart because I think we need to get a perspective of history for this currency pair around the same price levels that we’re challenging right now for the GBPUSD.
Take it back in time to the left-hand side of the chart. We could see all the way back here in 2012 we found resistance at the top of this blue box, near the green-shaded area, and support. It’s a little hard to see. It’s the orange-shaded area at the bottom of the blue box. You can see support here, November 2012, went back up, and eventually finally broke out underneath that support that we see over here, underneath that blue box, and then continued the downtrend.
Then we came back up after a period of time and went into congestion here inside the blue box, and I have it highlighted in red also between the same support that we saw back here and the same resistance that we see back here. Eventually getting above – inside this circle, getting above the box, and then continuing to pressure higher. Well, over the past several weeks, we’ve been bouncing around once again inside that same price zone, the green-shaded area, top of the blue box, orange-shaded area, bottom of the blue box.
We’ve been bouncing around here for several weeks here for the GBPUSD. So, again, historical price levels that we’re seeing here that have been recognized many times, going all the way back even into 2012. What’s important and what we’ve been discussing in the Trade Room is how to recognize a breakout without falling prey to a false breakout. And the way we’re going to do that here is look for something similar to what we see back in history. And if you see where the circle is, it was a clear single candle body open and close outside of our support. Below the support and outside of the blue box that you see here.
Single candle body there. Confirm the breakout, and then we continue to pressure lower. Well, how do we see the opposite of that? We go up here, where the circle is, up here in the middle of the chart. Above the box, where you see an open and close above – single candle body open and close above. Came back down. Challenged it. The top of that historical resistance as support, and then continued to pressure higher.
So, we go and we take those two examples, where the two circles are, the open and close outside of our support or our resistance, and we go back to the current time. And the question of course needs to be: do you see a single candle body clearly opening and closing below the historical support zone? And I could say that here on the Weekly Chart we do not. We don’t have that open and close, so there’s still the possibility before the close of this week – today we’re Wednesday. We have Thursday and Friday still to come. Before the close of this week, this current weekly candle that we’re seeing right here could literally turn into a blue candlestick and get right back above the bottom of those supports.
So, you need to be a little bit cautious here on the Weekly Chart and know that there’s still a possibility that we could turn back higher. Now, it doesn’t have to. It could continue to pressure lower, but what we’re looking for is increased confidence as we look to make our investments in the currency pair. One last thing before I continue down to the Daily Chart. Fibonacci from the lowest low to the highest high does put the .618 Fibonacci retracement level at 1.5721. That’s the pink-shaded area you see right underneath the current market price, so that clearly becomes the next target if it breaks out underneath here.
And if you go back to the left side, that really is solidified by what you see over here on the left-hand side of the chart back in the beginning of 2013. Let’s go ahead and take all that information now down to the Daily Chart. And as we spoke about in the Trade Room yesterday, we saw here on the Daily Chart a clear single candle body open and close underneath our orange-shaded area and the historical support. So, clearly this did become our resistance zone up into 1.5900 yesterday for the GBPUSD.
We saw a little bit of a push above it. No open and close above it, and now we’re right back underneath it. And as I said yesterday, you want to concentrate, and I talked about this in the Trade Room yesterday. You want to concentrate your efforts in the direction of the trend, which clearly is a downtrend, until you see evidence of a trend change. And we don’t see any evidence yet of trend change. We only see the downtrend. We only see the market pushing in that direction. So, the clear opportunities yesterday that we discussed in the Trade Room were selling resistance.
If you took a sell into the 1.5900-level, you’re now sitting with a pretty decent amount. 70 to 80 pips of profit as it pushes down into the low-1.5800s once again. Again, we can know where our target it. We have an idea that we’re looking to target all the way back down here towards the pink-shaded area. Why? Because that’s where the .618 fib of the larger previous uptrend sits right at the 1.5721-level, down there towards the pink-shaded area.
That is your target for any sells that you’re in. It doesn’t mean there’s not another opportunity if it comes right back up underneath that orange-shaded area. I think as long as it stays within or under that orange zone, even as high as the 1.5900, 1.5920-level, we look for selling opportunities and the possibility of this going back down in the direction of the trend. Even a push a little bit higher could take it to the blue-shaded area, and that’s something we talked about yesterday in the Trade Room. The blue-shaded area into the mid to upper-1.5900s, where the blue trend line is, could become another support.
Now, if we break above that, that will change the pattern of the trend and we’ll likely look for a little bit of a push back up towards the top of our blue box and into the next resistance highs that we see here. In fact, Fibonacci from the high, down to the low puts the .236 at 1.6120. So, clearly that would be at least the next resistance if we do take a push above the blue trend line and we start to change the trending pattern. Let’s go ahead and take it on down to the 4-Hour Chart.
We talked about the opportunities to sell this currency pair on rallies into resistance yesterday. You saw the push back here into the orange zone. A little bit above it. I was actually looking for the turn back to the blue-shaded area yesterday. It didn’t quite make it all the way up to the blue-shaded area and now has dramatically turned back around and went back down, but that doesn’t mean there’s not an opportunity today. Remember, if you’re going to trade the trend, what are you looking for? You’re looking for lower highs and lower lows.
So, if this makes a new lower high, which would be back here to the orange-shaded area, that becomes an opportunity to sell the GBPUSD once again. So, for me, it’s still a sell. It’s selling into resistance. I think anywhere underneath 1.5900 becomes a selling opportunity for the day today. If it doesn’t make it back to 1.5900, I don’t think this is a good sell at the current moment because your risk to reward is quite low. You could see yesterday’s bank flow levels sitting here, so I don’t think we really want to take a sell at the current moment. We’d rather sell it as it rallies back into resistance. That provides a lower risk, higher reward opportunity.
Buyers, if you’re interested in buying this currency pair, looking for reversal. I think you must wait for it to reach this 1.5725-level, down here towards the .618 fib of the previous uptrend, the pink-shaded area at the bottom, or the breakout above the blue zone. So, if you’re looking to buy this, pink zone or above the blue zone. More likely at this point in time, in the direction of the trend, we’re looking for selling opportunities on rallies into resistance for the GBPUSD today.
