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Getting started today on the Greater British Pound versus the US Dollar [GBPUSD]. Starting here on the Daily Chart, we could see that this currency pair was in an uptrend on the left-hand side of the chart. I’ve drawn several different trend lines to represent that uptrend.
A longer-term blue trend line here, coming from the bottom left-hand side of the chart. A little bit shorter with the black trend line, green trend line, and red trend line, representing different vantage points or links of the trend that we could see here. Most importantly with all those trend lines is the current market price is underneath them, so those provide us with some resistance for the current market.
Over the past few weeks, we’ve seen a little bit of a retracement back down, a little bit of a downtrend, shorter-term downtrend that we could see here, and I’ve put a blue trend line representing that downtrend. I think the most important part about drawing all of those trend lines, no matter which length of the uptrend you draw or the downtrend that you draw, the fact is we’re underneath all of those trend lines, which provides us an indication of resistance just above the current market price.
Let’s go ahead and zoom in a little bit here on the GBPUSD and take a look at this green-shaded area. You follow the green-shaded area back in time. That goes from about 1.6870 to 1.6900. You follow it back in time and you could see some historical resistance over here, when the market got underneath it, found resistance into the green zone, and went back down. You see resistance here, so historically, the green-shaded area has shown resistance on the left-hand side of the chart, so we can also see and expect some resistance underneath that same green-shaded area, and specifically I would think the 1.6900-level. That double zero level providing a psychological barrier in the market.
I’ve also taken a couple of Fibonacci retracement measurements. One from down here at the bottom of the red trend line to the highest high. One from the highest high down to the current low. I could probably even add another one. Just take another Fibonacci measurement from this low to the current high. So, we have three different fibs that are here on the chart. You can clearly see just at or just above that green-shaded area, where the trend lines intersect here, there is another clue of resistance based on Fibonacci. You could see all those dashed, blue lines in there as resistance into the green-shaded area.
And you can also see. Underneath the current market, you can see all those Fibonacci levels coming to congestion right there into the pink-shaded area. So, we can clearly see over the past four days, but not just there. You go back to the left-hand side, back here into – what is this? This is June here. You can go back here into May. You can go back here into April. You can go back here early April. You can even go back to the left-hand side. You see some resistance back in March. The pink-shaded area has held as support, resistance, and congestion over the past several months. That is our current support.
So, past four days and historically, the green zone, the pink zone have held as support and resistance. Of course at some point we will look for a breakout, either below the pink zone for a continuation of the downtrend or reversal to go back up above the green-shaded area. Well, I think the evidence is showing us right now, especially with the trend line evidence, the four uptrends and the one downtrend, that we’re looking for resistance and a continuation of the downtrend move, especially as long as we stay underneath 1.6900.
One other piece of evidence here on this chart, the Daily Chart, is the moving average that I have placed on the chart. That’s the darker green line you see coming up. The wavy line here. Right now that is a 100-day period or 100-period simple moving average, and we’re holding underneath that as resistance right now. We’re underneath it. We’ve tried to get back above it, staying around it, still underneath it. So, I suspect that that’s helping us identify resistance here also for the GBPUSD.
Forex Black Book trend bar at the very bottom of the chart is red, which gives us a clue that the trend has been going down. We don’t really need that to see that the trend has been going down. It is dark red today because we’re seeing that hesitation. It’s not continuing the downtrend. Of course if it breaks the pink zone, that will likely turn bright red again as it continues the downtrend.
So, what do you do with all this information? Well, I think right now the downtrend and the sellers are clearly in play here. I think they’re in control of this currency pair and not allowing the buyers to drive this back above 1.6900 and that green-shaded area. So, as long as that’s the case, my expectation is for selling into the green-shaded area, looking for targets back to the pink zone. A breakout under the pink zone, we look for the yellow-shaded area to be our next target, and that would be down here into the 1.6730s or so, even down towards 1.6700. That’s the yellow zone. That becomes our target lower.
Buying right now not really part of the scenario that I would come up with because of all that evidence pointing to the downside here. The only reason I think I would begin thinking about buys again would be if the market pushed above 1.6900, above that green-shaded area, and the downward-facing trend line. Then I might consider some new buying opportunities. So, right now I’m focused in on the sells.
Let’s take all that information down to the 4-Hour Chart. And as we get down here to the 4-Hour Chart, we could see that continued evidence of resistance here into the green zone. We can bring our arrows a little bit closer now here on the 4-Hour Chart. We see that blue trend line coming down from the top of the chart and now we throw in the bank flow levels. For those of you that were in the Trade Room yesterday, you remember that the bank flow levels popped up just before the Trade Room came out, and we could see that they were right there into that green-shaded area. So, the past two days, three days, we have seen the bank flow levels right there into the green-shaded area, right around 1.6900. That provides another piece of evidence pointing us to the bear side.
If you squeeze it in, you don’t see any evidence of buy pressure. There’s no buy levels underneath the market. Only sell levels above the market. So, that clearly gives us a clue that the sellers are still looking to retain control and drive this back down. So, if you’re a seller or if you’re already in a sell, you’re looking for it to go down. If you’re looking to sell, you’d actually like to see it tap that green-shaded area, the bank flow levels one more time. Give you an opportunity to sell it.
Remember sells on rallies into resistance are always going to be better lower-risk opportunities than selling into support. If it’s sitting on top of the pink zone, I would be discouraged from selling it because the risk is too high that it find support and bounces back up. So, if you’re looking to sell it today in the direction of the trend momentum and the bank flow levels, sell a tap into the green zone or a break underneath the pink zone. And right now we haven’t seen that, but a break underneath, we’ll call it, 1.6815, 1.6800, underneath the pink-shaded area and this last low, we’ll likely look for the continuation of the downtrend.
All of that is invalidated and changes if it breaks above the green zone. So, if you sell it, your risk is just a hair above the green zone, likely just above 1.6900, because if it breaks there, we’re probably taking at least a push back up here into the orange-shaded area. So, sellers, risk is just above the green zone. Buyers probably not even considering a buy scenario right now. If you are, you want to buy as closest to the pink zone as you can, so you can minimize your risk, or wait for the breakout above the green-shaded area for the GBPUSD today.