Since January 2016, bullish persistence above 1.4500 was mandatory to maintain enough bullish strength in the market.
However, the previous weekly candlesticks maintained their bearish persistence below the depicted weekly supply zone (below 1.4470) which allowed further bearish decline to occur.
The prominent demand level located at 1.3845 (historical bottom that goes back to March 2009) provided a significant bullish rejection on February 26.
As expected, an evident bullish recovery and a bullish engulfing weekly candlestick were expressed around 1.3845 (prominent weekly demand level) where a significant bullish swing was initiated on March 1.
On the other hand, the price zone of 1.4475-1.4670 has been standing as a significant supply zone during the past few weeks.
On May 3, the depicted long-term downtrend line came to meet the GBP/USD pair around the same price zone. Hence, significant bearish rejection and bearish weekly candlesticks were executed around the upper limit of it (1.4670 level).
As long as the GBP/USD pair keeps trading below 1.4670, the next bearish destinations for the pair will be located at 1.4300, 1.4220 and 1.4050.
Bearish persistence below 1.4475 will be needed to maintain enough bearish momentum.
On the other hand, a weekly closure above 1.4680 allows a quick bullish movement to occur towards 1.4950 initially.
In February 2016, a lower high was achieved around the level of 1.4530. This applied extensive bearish pressure against the price level of 1.4470.
The GBP/USD pair looked oversold when the previous bearish decline extended below 1.4040 (temporary support). That is why, a significant bullish recovery and a profitable long entry were suggested around 1.3845.
On April 7, the market failed to push below the price level of 1.4050. Moreover, a bullish movement was executed again towards the price levels of 1.4750 (slightly above the 61.8% Fibonacci level).
As anticipated, significant bearish rejection was expressed around the price zone of 1.4700-1.4750 (61.8% Fibonacci level) resulting in a strong bearish shooting-star daily candlestick.
Daily persistence below 1.4470 was needed to enhance further bearish decline initially towards 1.4350, 1.4220 and 1.4050.
However, On May 16, lack of enough bearish momentum below 1.4330-1.4350 resulted in the current bullish breakthrough above 1.4470.
Please note that the price zone of 1.4670-1.4700 corresponds to 61.8% Fibonacci level and the depicted downtrend line. Hence, significant bearish rejection and a valid SELL entry were suggested around these price levels.
Please note that the GBP/USD pair may become trapped between the price levels of 1.4480 and 1.4700 (61.8% Fibonacci level) until a breakout occurs (most likely a bearish one).
Daily persistence below 1.4470 will be needed to enhance further bearish decline towards 1.4350 and 1.4220.
The material has been provided by InstaForex Company - www.instaforex.com