On January 21, after the GBP/USD pair moved below 1.4220, evident signs of 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 were 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 1.4235-1.4375 constitutes a significant supply zone to offer evident bearish rejection. This is already being manifested on the chart.
Otherwise, bullish persistence above the zone of 1.4235-1.4375 allows further bullish advancement towards 1.4620 to take place (low probability).
A recent lower high was achieved around the level of 1.4530. This applied extensive bearish pressure against the price level of 1.4235.
Hence, an extensive bearish breakout below 1.4235 was expressed on the daily chart (GBP/USD looked oversold few weeks ago).
That is why, signs of bullish recovery and a possible long entry were expected around 1.3850. A recent bullish swing was expressed towards 1.4375.
The broken demand zone (1.4235-1.4375) stood as a significant supply zone to offer bearish rejection in the short term.
A lack of bearish rejection around 1.4235 allowed further bullish advancement towards the level of 1.4375.
Evident signs of bearish rejection were expressed around 1.4375 (61.8% Fibonacci level depicted on the daily chart).
That is why, a recent bearish swing is currently being executed towards 1.4030.
Trading Recommendations:
The depicted bearish rejection signs around 1.4375 (61.8% Fibonacci level) indicated a valid sell entry around the level of 1.4375. S/L should be placed above 1.4400. T/P levels should be located at 1.4150, 1.4100 and 1.4050.
On the other hand, other 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