On January 21, after the GBP/USD pair moved below 1.4220, evident signs of a bullish recovery were expressed around 1.4075. Hence, previous weekly candlesticks closed above 1.4220 and 1.4360 again.
Bullish persistence above 1.4360 was mandatory to maintain enough bullish strength in the market. The first bullish target was seen at 1.4615 where the most recent bearish swing was initiated.
As previous weekly candlesticks maintained their bearish persistence below the depicted demand zone (below 1.4200), the next weekly demand level was located at 1.3845 (historical bottom that goes back to March 2009).
As expected, an evident bullish recovery and a bullish engulfing weekly candlestick was expressed around 1.3850 (prominent weekly demand level). That is why, a valid buy entry was suggested near the same level.
On the other hand, the price zone of 1.4222-1.4360 now constitutes a significant supply zone to be watched for a possible short-term bearish rejection.
Otherwise, bullish persistence above the zone of 1.4222-1.4360 allows further bullish advancement towards 1.4620 to take place in the market.
The GBP/USD pair was trapped between 1.4620 and 1.4220 until the recent lower high was reached at the level of 1.4530. This applied extensive bearish pressure to the level of 1.4220.
Hence, an extensive bearish breakout below 1.4220 was expressed on the daily chart (GBP/USD looked oversold last week).
That is why, signs of bullish recovery and a possible long entry were expected around 1.3850. A recent bullish swing is currently being expressed towards 1.4220.
The broken demand zone (1.4222-1.4360) now constitutes a significant supply zone to offer bearish rejection in the short-term perspective.
Early signs of a bearish rejection were expressed around 1.4250 (50% Fibonacci level depicted on the daily chart).
However, we should mention that those bearish signs were not strong enough. Thus, more bullish advancement towards 1.4360 should be expected.
On the other hand, we should note that the level of 1.4030 is now standing as a prominent key level to offer bullish support if any bearish pullback occurs soon.
Trading Recommendations:
Price actions should be watched around the price level of 1.4360 for an Intraday sell entry.
S/L should be placed above 1.4400. Initial T/P levels should be located at 1.4220, 1.4100 and 1.4050.
On the other hand, risky traders can wait for a bearish pullback towards the key level of 1.4030 to buy the GBP/USD pair.
The material has been provided by InstaForex Company - www.instaforex.com