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 supported 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. However, a bullish engulfing weekly candlestick was expressed around 1.5050 by the end of last week.
Bearish persistence below 1.5200 is needed on a weekly basis to allow further bearish decline towards the weekly demand level at 1.4950. Otherwise, bullish correction towards 1.5350 should be expected (which is the ongoing scenario).
The previous bearish movement found its way towards the level of 1.5200 (prominent demand level), which prevented further bearish decline.
Instead of it, an 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 few weeks ago. Currently, these levels constitute prominent supply to be watched for new sell entries. The level of 1.5200 is being breached to the upside again today.
Note that bearish persistence below 1.5200 was mandatory to allow further bearish decline towards the next demand levels at 1.5090, 1.5025, and 1.4950.
However, the current 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 anywhere around 1.5350 (the depicted supply level). S/L can be placed above 1.5400.
For conservative traders, 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