A 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.
A long-term bearish target is projected towards the level of 1.4800 for this reversal pattern.
The previous demand level of 1.5200 (the origin of a previous bullish engulfing weekly candlestick) was broken to the downside a month ago. This bearish tendency was confirmed by the Shooting Star and the bearish engulfing weekly candlesticks of the previous weeks.
Hence, a quick bearish decline towards the weekly demand level of 1.4950 was expected as a result of the bearish breakdown below 1.5200.
Note that the previous weekly closure below 1.4950 clears the way towards 1.4800 (long-term bearish target).
On the other hand, a bullish closure again above 1.4950 brings another bullish pullback towards 1.5350.
Recently, the key level of 1.5200 was temporarily breached to the upside before a daily bearish engulfing candlestick was expressed around 1.5330 on November 20.
Bearish persistence below 1.5200 and then 1.5050 (previous weekly bottom) enhanced a further bearish decline towards the weekly demand level of 1.4950 (corresponding to the lower limit of the depicted channel).
A bullish engulfing daily candlestick was expressed around 1.4950 earlier this month on December 3.
A bullish pullback towards 1.5200-1.5230 was expressed as the GBP/USD pair managed to hold above 1.5000 and 1.5100.
Last week, a significant bearish rejection was expressed around 1.5230. Many bearish engulfing daily candlesticks were already expressed. The level of 1.4950 is the key level to be watched for new sell entries if bullish pullback occurs.
Price zone of 1.4800-1.4830 (the lower limit of the depicted channel) should be watched for valid buy entries.
Trading Recommendation:
Risky traders can sell the GBP/USD pair at retesting of the broken demand level at 1.4950. S/L should be set as a daily closure above 1.4960.
Initial bearish target would be located at 1.4850 where the lower limit of the depicted channel is located.
The material has been provided by InstaForex Company - www.instaforex.com