Yesterday’s FOMC brought more USD weakness, which is not a surprising fact when considering the technical analysis. Let’s start with the GBPUSD daily chart. Check out Nathan’s video for a view on the AUDUSD, among other pairs.
The Cable had a massive break out candle on the daily time frame (Tuesday). The 150 pip bullish seems like a giant compared to the smaller candles which were built during the correction of recent weeks. Moreover, the British Pound smashed through the trend lines as if there were not there.
The GBPUSD was already in a harmonious and well-balanced uptrend channel (blue) and had bounced off of the expected 61.8% Fibonacci retracement level – which is something that our regular readers and trading room members are well aware of. Did anyone take a GU long upon Fib, bounce at Fib or break?
So what could be expected next? Let’s hunt for targets!!
First of all, price is currently at the previous top. This is an obvious resistance level that could halt the uptrend. A retracement or chart pattern will most likely occur, which will be followed by a break above this daily resistance.
Other than that, there are no other resistance levels visible on the daily chart (we’ll take a look at the weekly chart in just a moment to find potential resistance there), so upon the break of the daily top traders could expect continuation to the -27.2% Fibonacci target and beyond.
But which -27.2%? For the moment I have placed 2 Fibonacci retracement levels. One Fib is using the most immediate swing high swing low (purple); whereas the other is actually using bigger leg up (and is using the principle of Fibbing from retracement to target from the bottom).
1) The purple Fib gave a 61.8% bounce – 1.6970 is the -27.2% target
2) The green Fib gave a 38.2% bounce – 1.7060 is the -27.2% target
3) Confluence of -100% and -61.8% at 1.74
PATH OF LEAST RESISTANCE
The screenshot indicates the potential wide open space between the Fibs. However, I do not expect all of that space to be filled without some retracements.
When price approaches the top of the uptrend channel and the bigger -27.2% Fib target at 1.7060ish, there is a decent probability of having:
a) A retracement back (red arrow) to the lower part of the uptrend channel
b) A retracement back to (red arrow) the broken top (red line) and resistance becoming support
c) A continuation of the uptrend up towards the -61.8% Fib target (green arrow)
Let’s mix things up and zoom out to the weekly. Here the following observations are most relevant:
1) The bullish breakout of the weekly resistance (magenta) is receiving follow through (blue channel)
2) The weekly top is at +/-1.7041 (red line), which must be approached with the expectancy that this can cause decent resistance
3) A break above the weekly top leads to the conclusion that there is no other resistance besides the -27.2% target at 1.7980 or roughly 1.80 (purple Fib)
4) The green -1.272 is equal to the purple -27.2, which is extra confluence
5) [tweetable alt=””]Conclusion: wide open space on the weekly above 1.7040 up to 1.80[/tweetable]
Do YOU agree or do you see it differently?
Thanks for sharing and many pips & Happy Trading
Winner’s Edge Trading, as seen on: