Sophia Todorova 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.
Yesterday the Gbpusd saw an impressive bounce from 1.5760 support with a bullish momentum that propelled it past the 1.5870 resistance that had kept it trading predictably within the 4-hour trading range. However, as the pair burst north, it found resistance at 1.5978, which is just at the underside of an inner trendline on the 4-hour timeframe. It is also here that the 1.618% Fibonacci retracement level of the most recent down-swing after having broken into the sell zone.
The formation has the appearance of a bearish head and shoulders reversal pattern, but shorts on the pair have to be well timed for entries and exits, because: (1) The main daily up trendline is still intact, with only a minor one broken (2) The broken 4-hour range resistance has now turned into support. Also take note of how bullishly yesterday’s candle closed after it bounced off of the outer trendline.
Therefore there is a level of neutrality involved in trading the pair currently, offering equally great buying and shorting opportunities. The sell zone is located between 1.6000 and 1.5870 (possibly into 1.5850s but we need to see a confirmed breach of 1.5870 support first); while the buy zone lies between 1.5870, and 1.5960. Conversely, it would extend from 1.5800 if that area were to be tested again.
In order to see a bullish trend resumption, we need to see the daily close back above its broken trendline, and the weekly resistance at 1.6107 taken out. Confirmation of a bearish reversal would indeed be a super challenge for the bears, because this reversal would mean not only a breach of the strong support at 1.5650s, but a significant effort to break the set of double bottoms on the weekly timeframe
Gbpaud is another interesting pair to watch. You can read my take on it here: http://winnersedgetrading.com/technical-outlook-trading-opportunities/
Thanks for reading, and a great weekend to you! 🙂
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