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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 uptrend for quite some time. We go all the way back down here to the bottom of the chart, in towards the 1.4800-level. We began the uptrend. Along the uptrend, we see higher highs and higher lows. Went into a period of congestion for several days here at the top of the trend. Then we got one last leg of the trend, pushing all the way back up into the yellow-shaded area at the top of the chart, close to the mid-1.6400s.
Now, in the Trade Room, we’ve gone back several times and taken a look at that yellow-shaded area and seen the historical significance of support and resistance back in time. We could do that again during the Trade Room today, but here, on this chart, we can see that that resistance has held for several days. Again, this is the Daily Chart, so several days holding resistance there. And over the time, I have suggested that as long as it held within or underneath that yellow-shaded area, we would expect it to find resistance and go back down. So let’s go ahead and change this arrow so we can actually see it on the chart, and there it is there.
So, there is that arrow, and we could see that I have been suggesting resistance into the yellow zone. As long as it held within it or below it, we’d look for the market to go back down. If, at any time, we saw the market break above that yellow-shaded area, we would expect a continuation of the longer-term uptrend here for the GBPUSD. But it has a difficulty doing that and now we’re seeing a fall back down. As it falls back down, what we’re going to be looking for are supports within the uptrend. Supports will help us identify places where we might expect that the trend could turn around and go back up in the direction of the trend.
Well, over the past few days, we’ve seen the purple-shaded area holding as that support. The current market is now underneath that purple-shaded area. Getting underneath there, we now identify the orange-shaded area here as our next support. Let’s go ahead and zoom it in here on the Daily Chart. And as I zoom it in here on the Daily Chart we could see that orange-shaded area a little bit better, but follow it back in time and you could see these two historical resistance highs where I have the vertical dashed lines over on the left-hand side or the middle side of the chart.
We could see the two historical resistance highs. Following that back to current time, that’s where we’re approaching now as our support for the day today. So let’s go ahead and put another arrow right there. That will likely be our support. I’m going to try and make that a little bit thicker for us so we could see it a little bit better. There we go. That makes it a little easier to see. That orange-shaded area there, where the arrow is, will likely be support today based on the historical resistance there. Just underneath there and getting a little bit closer to the trend line will be the green-shaded area down there, closer towards the 1.6150-level.
Also, here on this chart – actually, let’s go down to the 4-Hour Chart because this will make this easier to see as we get down here to the 4-Hour Chart. The orange-shaded area of course is our first support that we’re coming towards and the green-shaded area will be the next area. I’m going to zoom it out a little bit. Taking Fibonacci from the lowest low to the current high. The lowest low you see here on the 4-Hour Chart, which is the low down here underneath the 1.5890-level, close to the 1.5850-level is the last support low we see on the bottom of the chart. Taking Fibonacci from there to the current high incidentally puts the .382 Fibonacci retracement level right here into that orange-shaded area.
Again, follow it back to the left-hand side of the chart. We see resistance here. We see resistance back here, so those historical resistance likely to become support. Now, here’s the scenario for the day today. If you sold it into the yellow-shaded area, you’re following profit. You’re protecting profit, making your stop down, protecting profit, targeting the orange-shaded area. Below that, of course, the green-shaded area would be your next targeted level if it continues to move down in the current direction.
If you’re not already in a sell, there is potential, if we get a clear open and close underneath the purple-shaded area, that that becomes an opportunity to sell it. Under the purple-shaded area, underneath the 1.6300-level to target again the orange or the green-shaded area. Then, once it reaches there, potential bounce back in the direction of the overall trend. So, under the purple-shaded area, we sell towards the orange or green-shaded area. If you’re already in a sell, you’re protecting profit. If you’re not, I would expect your probably waiting for an open and close underneath here to confirm the breakout underneath the purple zone. Otherwise, it simply could be a false break here.
Back above the purple-shaded area, we’ll likely look for another turn back towards the yellow zone at the top of the chart and the highest highs that sit up here. And of course, then, once it reaches up there, we could eventually see a breakout above the yellow-shaded area and a continuation of the longer-term uptrend. So, these arrows that you see here on the chart – the black arrows – are giving us our potential opportunities for the day today. Dipping into support, specifically the orange or the green-shaded area become potential support for a turn back in the direction of the trend. A breakout underneath the purple-shaded area, which would be, for me, an open and close underneath the 1.6290, 1.6300-level, look for an opportunity to sell it towards that orange and green-shaded area.
Once it reaches one of those areas of support – orange or green – watch for clues to support and the possibility of this market turning back up in the direction of the trend. Again, the Fibonacci that we’ve just placed there from the low to the high puts the .382 fib right here in the middle of that orange-shaded area. The .382 Fibonacci retracement level sitting right here in the middle at the 1.6223-level. That’s right in the middle of that orange-shaded area. That helps us identify that as a support. If it breaks out underneath there, the green-shaded area incidentally has the 50% retracement level of this previous uptrend at 1.6157. That’s right at the top of the green-shaded area and right into the blue trend line.
So, one of these two places has Fibonacci. Green or orange has Fibonacci retracement level. Historical support and resistance as a backup on the left-hand side, and of course the trend line here coming into play. If you’re selling, those are targets for profit. If you’re looking for an opportunity to trade in the direction of the trend, one of these two areas will be our likely area to look for a turnaround support and a turnaround in the direction of the uptrend for the GBPUSD today.
