Hello Forex traders,
Will the British Pound be able to break out today or this week?
That is the question on my mind. The reason why I am curios is because a break above the consolidation could translate into a very impulsive move up. Let us examine the GU in more detail.
Let us review various time frames to understand the market structure of this currency pair. Let’s start with the daily chart:
1) Price has been in uptrend July 2013
2) Well established uptrend channel present (blue channel)
3) Price respected a shallow Fibonacci level (23.6%) and went up swiftly to 1st target at -27.2%
4) In that process, price broke out of a weekly triangle (purple solid and orange dotted)
5) After hitting -27.2% target, price made consolidation and used broken resistance and 50% Fib (blue) as support for an upside bounce again (dotted green)
6) Price has broken above major weekly resistance spot of +/-1.6730 (dotted red lines)
This provides us with an understanding of the long-term structure of this pair. Now it’s time to zoom in and review whether other factors are lining up as well.
First let’s zoom in to the most recent part of the daily chart. There we are able to see that:
a) the GBPUSD bounced off of various layers of support
b) then made an impulsive run of 7 bullish daily candles in a row
c) then followed 5 smaller (compared to the upside) bearish candles
Yesterday’s daily candle was bullish and a pinbar, which could be a good signal that the retracement is finished.
On the 4 hour chart there are several interesting pieces of bullish evidence:
1) A clear burst of upside momentum is visible
2) The downside retracement was slow and corrective
3) Price stopped at the 38.2% Fibonacci retracement level
4) Bullish 4 hour pinbar at the 38.2% Fib
5) Chart pattern is a bull flag (at least if it stays above the 50% Fib)
Conclusion: the intermediate trend is moving choppily down / sideways… What’s next?
At what point will the GU confirm that it is indeed ready to break up and continue? What is the trigger on the chart?
The Cable could be good to go when the price is able to break above the short-term resistance such as the trend lines (blue) and horizontal levels (red).
A break above the resistance could very well be the trigger that confirms the upside break and an upside momentum could follow through to higher levels (green arrows).
Alternative scenario: of course there is always the risk that price retraces to a deeper Fib such as the 50% retracement level. However, considering the reward potential that is a risk that seems justified to me. For more information on entries, check out this article… but a break of the 1 hour tops with a stop loss below yesterday’s daily low is a valid approach.
Another option is the GBPJPY currency pair, which has an interesting structure as well.
Price has been in a tremendous uptrend on the daily chart with a well establish uptrend channel (blue). Recently price retraced to the bottom of the channel and bounced off of the 61.8% Fib level.
A break of resistance could see a continuation of this uptrend – just as the break of previous trend lines (magenta and purple) also confirmed the continuation of the trend.
Are you interested in trading GJ or GU? Let us know down below!
Thank you for sharing this article and Good Trading!
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