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I’m going to begin the day today on the Greater British Pound versus the US Dollar [GBPUSD]. Starting here, on the Daily Chart, we can easily see that this currency pair has been in an up trend for quite some time. We go all the way down to the bottom left-hand side of the chart, bottom left-hand side of that red trend line, back into July of this year. We began the up trend. We see higher highs and higher lows, as it continued to rise along that bullish red trend line.
Now, in the most recent days, we have seen a little bit of reversal or retracement of that trend. And if we go to the top of the chart, we could see that the highest high is all the way up here into the mid-1.6200s. And over the past couples of weeks, we’ve seen a fall all the way back down here, capping out or bottoming out in the low, into the 1.5900-level.
Now, over the past five days, we’ve seen a little bit of a retracement of this down trend. Now, there’s a couple of fibs I want to point out on this chart also. First off, the previous up trend from the lowest low to the current high. Taking Fibonacci of that long trend range right there, we find the .236 Fibonacci retracement level right at the top of this pink-shaded area. Now, I know it’s hard to see on this Daily Chart, but there is a dashed like that you could see following. If I move that black like just a little bit, you’ll see that dashed line just at the top o this pink-shaded area, where these garbled numbers are. That is the .236 fib of the longest uptrend range.
And then also taking Fibonacci of the current down leg from the highest high to the current lowest low – that same low where that .236 fib is – we find the .382 fib sitting right here at 1.6044 – that’s the top of the blue-shaded area. So, currently, we’re finding resistance at the .382 of the current down trend – that 1.6044 – and we’re finding major support into the pink-shaded area, into the .236 fib of the previous up trend.
If it breaks through the 1.6040s today and pushes through that blue-shaded area, we’re likely looking for a continuation as it pushes all the way back up here towards the green-shaded area at the top of the chart. Of course, it wouldn’t be out of the question, because we have seen that before, where it breaks above this blue-shaded area, holds above it, and then challenges that green zone a couple of times on the left-hand side. Similar situation likely to take place over here on the right-hand side if we see a clear open and close above this 1.6035 to 1.6040-level here for the GBPUSD that we’re seeing right now.
If it doesn’t and can hold underneath the red trend line and that blue-shaded area, potential to fall right just back down towards the lows into the pink-shaded area and, of course underneath there, we’ll likely look for it to continue lower. So, we’re at a critical point today. A critical breakpoint or bounce point really, all support and resistance are doing is telling us where critical decision points are. Where have the buyers and sellers battled it out for control of the currency pair?
And in this area right here – this light blue-shaded area – we can see that the buyers and sellers historically have battled for control. Fought it out for control. And right now the buyers are in control, and the question is: are they going to stay in control and it’s going to break through this blue-shaded area and red trend line and continue higher, or are the sellers going to fight back and drive it back down towards the pink-shaded area? So, it’s at a critical decision point now for the GBPUSD.
Take that information down to the 4-Hour Chart and here, again, we can see that the currency pair is testing into the top of that blue-shaded area, where historically we could see, on the left-hand side, buyers and sellers fighting it out. Sometimes it finds support. Sometimes it finds resistance into the top of this blue-shaded area. Right now we’re looking for resistance. We can see that red trend line coming from the Daily Chart. That red trend line is the bullish trend line. We’re testing underneath it. We could see how, over the past several days, we have reacted underneath that red trend line.
It’s found resistance underneath here, over here in the past, and of course here we are, again, challenging that red trend line. We can also see where yesterday’s bank flow levels are. And actually, over the past four or five days, we have also seen the bank flow levels sitting here, into the top of this blue-shaded area. It’s my expectation that as long as we hold within or underneath this red trend line and this blue-shaded area, we’re likely looking for another bounce of resistance and a fall back down for the GBPUSD.
If, indeed, we see an open and close above the 1.6035 to 1.6045-level – I’m going to use about a ten-pip zone there. If we see a clear open and close and hook back down to the top of this as support similar to what we’ve seen back in the past – it opens and closes above it, tests as support, and bounces back up. And really, that’s a good example over here. Let me just quickly highlight this example here, and I’m just going to draw a circle like this. Take this circle and put it right here, where the market opened and closed above the blue zone, tested back down as support, and then made the new rally higher.
If we see something like this over here, in the current time, I will definitely expect it to push back towards the green-shaded area at the top of the chart. As long as it doesn’t do this and holds underneath it, likely looking for a bounce back down in the opposite direction for the GBPUSD, especially if today we see today’s bank flow levels come out and they’re similar to what they have been over the past four or five days, just at the top of this blue-shaded area.
So, an open and close above the blue-shaded area, similar to the orange circle on the left-hand side, likely looking for it to turn back towards the green-shaded area. As long as we find resistance under the red trend line and underneath the top of that blue-shaded area, potential for a bounce back down in the direction of the momentum and trend that we’ve seen for the past several weeks for the GBPUSD today.
