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 provided significant bearish 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 quick bearish decline towards the previous weekly level of 1.4950 was expected as a result of a bearish breakout below 1.5200.
Extensive bearish pressure has been applied to demand levels located at 1.4620, 1.4360, and 1.4220. All of them have been breached to the downside.
The next demand zone to meet the GBP/USD pair is located around 1.3840-1.3660, which corresponds previous bottoms established back in May 2009. However, early signs of bullish recovery can be seen off 1.4075.
On the other hand, bullish persistence above 1.4220 and 1.4360 is mandatory to bring bullish strength into the market again. The first bullish target is seen at 1.4615.
During 2015, significant bearish rejection has been expressed around 1.5770 and 1.5230 where a bearish Head and Shoulders reversal pattern was formed. Since then, the market has been trending downwards within the depicted bearish channel.
The level of 1.4950 was broken to the downside few weeks ago, constituting a significant supply level. As anticipated, it offered a valid sell entry on December 24.
Daily persistence below 1.4800 (the lower limit of the current bearish channel) favored a bearish decline towards 1.4680 and 1.4610 where previous prominent bottoms are located on the GBP/USD daily chart.
Currently, the GBP/USD pair looks oversold as it is being pushed further below the prominent demand levels of 1.4620, 1.4360, and 1.4220.
That is why any signs of bullish rejection around the depicted demand level of1.4220 should be considered a valid buy signal.
Trading Recommendation:
Risky traders can have a valid buy entry when the GBP/USD pair maintains a daily closure above the level of 1.4220.
Trading Recommendation:
Risky traders can have a valid buy entry when the GBP/USD pair maintains a daily closure above the level of 1.4220.
S/L should be located below 1.4150 to minimize our risks.
Initial T/P levels should be located at 1.4360, 1.4440 and 1.4500.
The material has been provided by InstaForex Company - www.instaforex.com