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I’m going to begin the day today on the Greater British Pound versus the US Dollar [GBPUSD]. I’m going to start here on the Weekly Chart and get a longer term perspective of some of the levels, and then we’ll go down to the shorter-term compressions as we look for new intraday opportunities.
First off, starting out here on the Weekly Chart, we could see that over the past several months, we have been in an uptrend where the blue trend line is on the right-hand side of the chart. We start all the way back here in July of 2013. We began pressuring higher from down here into the 1.4800s and we have moved all the way up into just shy of the 1.6600-level at the top right-hand side of the chart.
A couple of levels I want to point out here, and we’ll zoom in and take a closer look at them on smaller compressions, but first off the pink-shaded area at the very top of the chart. That has capped out our resistance. That’s into the mid to upper-1.6500s. The pink-shaded area at the very top of the chart. You could see that that is our current resistance. We follow that back in time. A couple of specific areas I want to look at all the way back here into August. And if I put my crosshair right here on the pink-shaded area, you could see August of 2011. We could see resistance back here.
So, we have historical resistance right here into that same pink-shaded area. You go back just a little ways further. You could see some resistance here into, and that’s right at May of 2011. You can see some more resistance there. Again, this is the Weekly Chart, and then you go back just a little bit further and market did push above it, but quickly got right back underneath it. It pushes back to the green-shaded area at the very top of the chart.
You take those same two areas – the pink and the green. Our two major resistance levels that we see here. And you go back to the left-hand side of the chart and look at all the congestion and noise and resistance around the pink zone and then just into the green zone, as the market found resistance before the next major reversal. So, we could see how clear and major that these levels of resistance area or important that these levels are. That’s what I meant to say for the GBPUSD into resistance. And so far, on the right-hand side of the chart, capping the upward trend that we’ve had since mid-year last year.
So let’s go ahead and move this down to the Daily Chart and this will give us a little bit of a closer viewpoint of the current resistance. And there of course is that pink-shaded area at the very top of the chart that I looked at on the Weekly. If I squeeze it in a little bit, you could see the green-shaded area, which would be the next area of resistance. We could see that’s still a pretty long ways away from the current market value.
I have the blue trend line here. We could see that we attempted to break under the blue trend line, but no real solid push underneath it. Remember an uptrend has higher highs and higher lows. So, if you define the trend as having higher highs and higher lows, we can still define it. Even if you were to take the trend line off, we could still define it as having higher lows just looking at these last two black X’s. So, if we’re going to see a continuation of the uptrend, we would expect to see a higher high, and that of course would be above the highest high here into the pink-shaded area.
If we break down under the blue trend line and the last support low, that changes the overall pattern of the trend and we look for it to continue to pressure lower. Let’s go ahead and zoom it in here on the Daily Chart. Zooming it in here on the Daily Chart, I’ve also added Fibonacci from this low here, and let me go ahead and bring an X here also. From this low here – the left-hand X that’s in the middle of the chart – to the highest high puts the Fibonacci – .382 Fibonacci retracement level – at 1.6314. That’s our purple-shaded area where the market is currently finding support.
So, we have rising lows. We have an upward trend line and we have support holding here into the low-1.6300s along with Fibonacci. If we break down through there, I would expect the market will have a change of the pattern of the trend and we’ll look for it to go lower. So, under the purple zone, we go lower. Right now the yellow zone, as over the past few weeks, held as resistance. If we get above that yellow-shaded area, then there becomes a higher expectation that we’re going to challenge back to the pink-shaded area at the very top of the chart. And I’ll move that over as we get down to the smaller compression.
So, this is our expectation. Resistance – yellow zone. Support into the purple zone. Let’s go ahead and take it down to the 4-Hour Chart and let’s get that pink-shaded area moved over towards the current market price. Let me move it over here. Squeeze this over here like this and get that over here. So, that becomes our next resistance. Yellow zone is our current resistance. I’m going to pull this purple-shaded area down just about right here. Under the purple-shaded area we go lower. Support here into the purple-shaded area right now. Resistance into the yellow-shaded area. If it gets above the yellow-shaded area, of course our expectation is that it will push to the pink-shaded area.
Those become your outlooks for the day today on the GBPUSD. One last thing I want to do of course and that is recognize of course that we have seen some downward price action. The trend has been down. If you take a look at our black trend line that you see here on the chart, the trend has been pressuring lower. We’re challenging that today. I’m not too excited about the fact that we’re just seeing a peak above it. I want to see an open and close. So, if we see an open and close above the yellow zone – we’ll call it 1.6450 – that gives us a higher expectation that we’re looking for it to go up again. Staying within or under the yellow-shaded area, we’re back down to the purple zone. And of course underneath there we change the pattern of the trend.
So, the yellow-shaded area – 1.6450, 1.6440 – is our critical decision zone today. Staying within or underneath it, we look for it to go back down. Getting above it, we look for it to go back up. If we take a look at our most recent bank flow levels, lets actually go all the way back to last Thursday. Our most recent bank flow levels put the bank flow levels right here into the yellow-shaded area. We didn’t get any Friday, but when they get published today, I don’t think they’ll be too far off of what they were on last Thursday. Definitely we’ll expect them to be above the yellow-shaded area. It would be my expectation, if we get back low levels today, they’ll be right just above 1.6450 and above this yellow zone.
We’re looking for resistance and a turn back down for this pair. If they come out much higher towards the pink-shaded area, of course we’ll look for it to continue to pressure higher. So, boiling all that down to an intraday trading strategy, we do have a red trend bar with the Forex Black Book, which gives us a bearish trend bias. We see lower highs, and remember go to your trend definition. Lower highs, and I’ll just put a couple of black X’s here. The lower highs tell us that we have potential to be in a shorter term downtrend. Higher lows tells us we’re in a potential to be an uptrend. We are really looking for a breakout on this pair. Above the yellow zone goes higher. Below the purple zone goes lower.
Until then, you could be looking for sells into the yellow-shaded area with fairly minimal risk. Stops just above here in case it breaks above to go higher or buys into the purple zone, which we’re a long ways from that. So, I think your closest opportunity today may be for short term sells into the yellow-shaded area. Maybe watching for the bank flow levels today to show up just above the 1.6450-level. Selling into resistance, looking to target back down to the purple zone, and a continuation lower, knowing that the risk in that scenario is that it breaks above here. If it opens and closes back above 1.6450, swapping those positions for buys, targeting back to the pink-shaded area becomes and opportunity for the GBPUSD today.
