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 significant resistance.
Recent weekly candlesticks came as bearish engulfing candles, closing below the level of 1.5220 (the neckline of the Head and Shoulders pattern).
This supports the bearish side of the market in the long term. An approximate target should be located at the level of 1.4800 for this reversal pattern.
The previous demand level at 1.5200 (the origin of a previous bullish engulfing weekly candlestick) was broken down two weeks ago after it had provided significant bullish demand for the GBP/USD pair.
Hence, the price zone of 1.5200-1.5230 constitutes a significant supply zone to be watched for price reactions (more details on the daily chart).
The next demand level to meet the GBP/USD pair is located at 1.4950 (weekly demand level) if bearish persistence below 1.5200 is maintained on a weekly basis.
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 reaction was performed around 1.5200-1.5170 (resulting in bullish engulfing daily candlesticks).
This led to the previous bullish pullback towards 1.5600 (the backside of the depicted uptrend). It placed the GBP/USD pair under significant bearish pressure.
The demand levels of 1.5350 and 1.5200 were broken down last week. Currently, these levels constitute prominent supply to be watched for new sell entries. The level of 1.5200 is being revisited today.
Note that bearish persistence below 1.5200 is mandatory to allow a further bearish decline towards the next demand levels at 1.5090, 1.5025, and 1.4950.
On the other hand, a daily breakout above the supply level of 1.5220 enhances the bullish side of the market towards 1.5350.
Trading Recommendation:
Risky traders can sell the GBP/USD pair around 1.5220 (the current supply level). S/L can be placed above 1.5250.
On the other hand, a low-risk buy entry will probably be offered around the weekly demand levels at 1.5000-1.4950.
S/L should be placed below 1.4920. Initial T/P levels should be located at 1.5170 and 1.5300.
The material has been provided by InstaForex Company - www.instaforex.com