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 at 1.5200 (the origin of a previous bullish engulfing weekly candlestick) was broken down 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 at 1.4950 was expected as a result of the bearish breakdown below 1.5200.
Note that another weekly closure below 1.4950 is needed to clear the way towards 1.4800 (long-term bearish target). Otherwise, another bullish pullback towards 1.5350 should be expected.
Prominent demand levels at 1.5350 and 1.5200 were broken down a few weeks ago. These levels currently constitute prominent supply to be watched for new sell entries.
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 on December 3.
That is why a bullish pullback towards 1.5200-1.5230 and probably 1.5350 should be expected as long as GBP/USD bulls keep moving above 1.5000 and 1.5100.
Trading Recommendation:
A valid buy entry was suggested around the weekly demand zone of 1.4950-1.4930. S/L should be elevated to 1.5100. T/P levels should be located at 1.5000, 1.5170 and 1.5300.
On the other hand, a valid sell entry can be offered anywhere around the supply level of 1.5300. S/L should be placed above 1.5350.
The material has been provided by InstaForex Company - www.instaforex.com