Sophia Todorova is the host of the live trading room for the London session. She has a background in teaching and psychology, and as such relishes the idea of assisting new traders on their journey to Forex trading success. Technical Analysis is her passion. The charts speak, and she listens. To Trade Live with Sophia Join Winners Edge Trading Premium Services.
Bulls have been having quite a blast, buying the gbpusd. Since the start of the up move about eight weeks ago, there have been very shallow retracements evident on the daily timeframe. Now, over 1,500 pips later, the pair has run into an incredible shelf of past support, on the weekly timeframe. Looking at the weekly chart below, the red horizontal line marks the zone, at 1.5950. On the daily chart, is a single bearish candle that ominously points to possibilities of a reversal.
It is not the bearish candle on the daily in itself that suggests a reversal, or correction. It is that coupled with the weekly resistance, and to a lesser extent, the fact that the market is very overstretched. From experience, we know that it is unwise to try and pick the top or bottom of a trend without credible confirmation, so I am watching the 4hr chart for confirmation and follow-through. This 4-hour chart is holding above its trendline. After a test of 1.5820, the pair bounced stubbornly, and closed with a bullish candle.
Watch for a close below the 4hr trendline, and clear 1.5800. If necessary, wait for a pullback to the back of the trendline to short. My stop would go above 1.5965. My ultimate target is 1.5590, just above the weekly breakout level, and as usual, I would scale out of my position gradually. I am standing aside on the pair at the moment, but if the resistance is broken, I will consider buying after the proper trade setup.
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