Few months ago, the market was pushed above the weekly key zone around 1.5550 in an attempt to reach the area of 1.5900, which has been providing the GBP/USD pair with evident resistance.
The previous weekly candlestick closure above 1.5500 hindered a further bearish decline and enhanced the bullish side of the market towards 1.5670 (previous weekly high) and 1.5780 (61.8% Fibonacci level).
However, recent weekly candlesticks came as bearish engulfing candles, closing below the level of 1.5450 (neckline of the Head and Shoulders pattern).
It supports the bearish side of the market in the long term. An approximate projection target should be located at the level of 1.5050 for the reversal pattern.
In the short term, the nearest demand level around 1.5170 (recent weekly bottom and the origin of a previous bullish engulfing weekly candlestick) has provided significant bullish rejection this week.
Weekly persistence below the price level of 1.5350 (prominent weekly bottom) is mandatory to allow the further bearish decline to occur.
On the other hand, persistence above it hinders further bearish momentum giving time for more sideways consolidations which may extend up to the price levels of 1.5500 and 1.5550.
Prominent supply/resistance was seen around the level of 1.5770 (prominent 61.8% Fibonacci level) where the right shoulder of the depicted bearish reversal pattern is observed.
That is why, the valid sell entry was suggested for retesting at 1.5770 one month ago. All of its targets were successfully achieved.
Moreover, the previous bearish movement found its way towards the level of 1.5200 (prominent demand level), which prevented further bearish decline.
Instead of it, evident bullish candlestick took place around 1.5200-1.5170 (resulting in bullish engulfing daily candlesticks) leading to the recent bullish pullback towards 1.5600 (the backside of the depicted uptrend). It applied significant bearish pressure to the GBP/USD pair.
As anticipated, obvious bullish pressure was expressed around the zone of 1.5150-1.5200 (previous prominent weekly bottoms). Since then, bulls have been pushing towards 1.5350, a bullish breakout above which is currently taking place as depicted on the chart.
The price zone of 1.5500-1.5550 remains a significant supply zone to be watched for valid sell entries.
Daily fixation below 1.5350 is needed to allow bearish movement to occur towards the level of 1.5150 (previous prominent weekly bottoms), then 1.4970 (weekly demand level).
Trading Recommendation:
On the other hand, a low-risk buy entry can be offered around the weekly demand level (1.4970) if a bearish breakdown of 1.5150 occurs soon. S/L should be placed below 1.4930.
Risky traders can take a valid SELL entry at the price level of 1.5550 if the current bullish pullback continues pushing above the depicted Intraday supply level at 1.5350.
The material has been provided by InstaForex Company - www.instaforex.com