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I’m going to get started today on the Greater British Pound versus the US Dollar [GBPUSD]. I’m going to start all the way out here on the Weekly Chart. I think we need to get a bigger perspective of this currency pair, so we can really understand what’s happening right now in the current market.
First off was the previous long-term uptrend. We can see, going all the way from down at the bottom of this first blue trend line, going all the way from July of 2013, we began this uptrend as it started moving higher from down here into the 1.4700s. We saw a little bit of a push. Went into some congestion just underneath this green zone. Look how many weeks. A couple of months it sat underneath this green-shaded area, into the mid-1.6100s as resistance. Several weeks holding here.
Then we finally broke above that green zone, continued to pressure higher, a new black uptrend developed as it began the next leg of the uptrend, went into some resistance here into February of this year, into the mid-1.6700s, another leg, and a final pressure higher towards the 1.7200-level at the top of the chart. And that happened back in July of this year. Now, since July of this year, we’ve seen a little bit of a change as, over the past six weeks or so, we’ve seen a pretty strong downward movement as it’s pushed down a little bit more than five hundred pips, back down into the 1.6500s.
So, definitely a previous uptrend, but now we’re in a bit of a retracement of that previous uptrend. Three levels that I want you to pay attention to here on the Weekly Chart. We’ll look at them on the smaller compressions. First off, the blue-shaded area here. That’s our current support. The blue-shaded area. The pink-shaded area would be the next support, and this green-shaded area very interesting as a longer-term support. I zoom it out one more time here on the Weekly Chart. Follow those three areas back. The blue zone: you see some resistance back here in the past. Not a lot, but a little bit. The pink-shaded area: you see support here into March of this year. And then you go back here. You see a little bit more resistance lined up here along that pink-shaded area back into 2011.
But I think the green-shaded area is very interesting down here. Green-shaded area. You follow it back in time. Look at all the resistance. Clear resistance that you see down here towards the 1.6200s. Also, taking Fibonacci of the long uptrend, from the lowest low down here at the bottom of the blue trend line to the current highest high for this pair, puts the .382 Fibonacci retracement level right here at the top of the green-shaded area. So, .382 fib of this long-term uptrend sitting at the top of the green-shaded area aligned with these historical resistances becomes a clear target on the way down.
Now, as long as the downtrend persists, I think that’s what we shoot for. I think we look for it to go all the way back down there. I know there’s a lot of folks hoping that we’ll see a turnaround for this currency pair and another challenge back higher, but I think that’s a clear potential target on the way down if the downtrend continues to persist for this currency pair. Let’s go ahead and take all that info down to the Daily Chart. We could see the current downtrend. It’s been such a long ride without any real retracement. No real pullback for this currency pair.
I know a lot of folks are looking for that pullback. If it does, then great. If it doesn’t, we already have an idea of where it’s going to go. First off, underneath the 1.6550 to 1.6570-level. That’s the blue-shaded area. Again, historical support and resistance lined up in there. Minor support and resistance. Beyond that we go down to the pink zone. A little bit more support and resistance. And again, that green-shaded area down here close to 1.6300 really is looking enticing for a potential support.
Obviously there’s different subjective ranges we could draw with Fibonacci. I have the longest uptrend drawn with Fibonacci to determine that green zone. We could go from the bottom of the black trend line, this green trend line. It’s kind of hard to see that green trend line in the middle there, but there’s a green trend line coming up. There’s this red trend line. We could take Fibonacci from any one of those ranges, but I still think the longer range is going to give us a clearer picture of what we’re looking for. Even if we look for Fibonacci extensions, I still think that this level down here into the green-shaded area is lining up to be our most clear level to shoot for on the way back down. So, we already know where our supports: blue, pink, and green. Resistance will be the purple-shaded area. That’s close to the blue trend line right now.
Right now the downtrend is persisting. We’re stalling out at a little support. No real evidence yet that the buyers are taking hold of this currency pair again. Zoom it here on the Daily Chart. You could see no evidence yet of buyers. We only have evidence of sellers here in the market. No price action dictates reversal. Nothing here telling us it’s going to go back up yet. We are stalled at support, but I think a breakdown of this blue-shaded area today, we look for a target at least over the next coming days down here to the pink-shaded area, which is into the mid-1.6400s, down there into the pink zone.
If you’re looking to sell in the direction of the trend, which is probably the direction I would be focused on right now at least, then you’re probably waiting for one of two things. It comes back to resistance. That’s the purple-shaded area, or breaks through support. That’s the blue-shaded area. Those are your two opportunities to sell this currency pair. Purple area as resistance. Blue-shaded area as support.
Taking Fibonacci of just the shorter range here from the bottom left-hand side of the chart, where the red trend line begins, to the highest high puts the .886 fib right at 1.6547. Clearly it needs to break underneath there if it’s going to go lower. A retracement. I don’t think it’d be too difficult to see a retracement at least to the purple-shaded area. Maybe even as high as the yellow-shaded area where this last support over here sits. Let’s actually take Fibonacci from this low right here, back up to the highest high, because doing that, we can see that the 1.27 Fibonacci extension level of that uptrend sits right here at 1.6557. That’s the midst of our blue-shaded area.
So, very interesting. That is of course current intraday support. Sellers still in control of this currency pair. 1.618 of that same range sits all the way down here at 1.6384. So, long ways down for that if it continues to pressure in the direction of the trend. Let’s go ahead and take all of that down to the 4-Hour Chart. We already know that we’re focusing in on the sell side. Yesterday we saw the bank flow levels pop up during the Trade Room, and boom, here they are right here in our purple-shaded area. So, again, if you’re selling this, back to the purple zone becomes a sell into resistance.
We’ve circled these three levels. I’ve had these here since last week. It went up, found resistance, went down. Went up, found resistance, went down. Went up, found resistance, went down. Guess what we’re probably waiting on right now if you’re looking for a clear opportunity to trade this. Up, and find resistance and turn back down. So, purple-shaded area is a continuation of that pattern. What would be a change? When would we start buying it? If the pattern of the trend changes. And like I said, at least at this point there is no evidence yet of a change in pattern for the GBPUSD today. We’re focused in on the sell side, selling resistance, break of support.
If you’ve taken a buy here at the blue zone, I don’t think anybody would argue with the fact that we’re into support and you could look for a buy. There’s fairly low risk, but just pay attention because if it breaks out under that blue zone, we already have an idea of where our downside targets are for the GBPUSD today.
