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I’m going to begin the day today on the Greater British Pound versus the US Dollar [GBPUSD]. Starting on the Daily Chart, of course we need to recognize that we have been in an uptrend for quite some time. We started all the way back in July, down into the 1.4800-level and made the climb all the way into the mid-1.6200s.
Now, over the past several weeks, we have seen a little bit of a change, where, easily on the left-hand side, we were in an uptrend with higher highs and higher lows. We’ve seen that begin to change here at the top of the trend, where, over the past several weeks, we’ve seen two challenges of the 1.6250-level, which we could essential interpret as a double-top here for this currency pair. We’ve also seen a change with the trend line, where the market was holding above the trend line for several months, and then, all of a sudden now, we see the market underneath the trend line.
So, we’re starting to see some clues that may point to potential trend change. Now, going back to the trend, within the uptrend, we have higher highs and higher lows. To interpret or identify a change in that trending pattern, we then look for lower highs and lower lows to tell us that we have turned into an uptrend. And I don’t think we’ve sufficiently seen that yet.
Yes, today we are creating a lower high. If this high – the current high – stays lower than the previous high, then we will have a lower high. But I don’t think we’ve sufficiently seen a lower low yet. And if you follow this back just a little ways, where I have this black X and the pink-shaded area, we could see the last low that sat here, in towards the 1.5900-level for the GBPUSD. And that’s currently where we’re holding as our low now.
So, to sufficiently change the pattern of the trend, where, on the left, was higher highs and higher lows, we’d now need to see a change of the lows, which would mean a lower low. So, we’re watching for clues to reversal, which is the double top and the retest under the trend line. We’re also watching for areas of resistance that may give us an opportunity to trade in the direction of that potential trend reversal, but then we’re also looking for confirmations of that reversal and a continuation of a trending pattern, which would be lower highs and lower lows.
So, using all of that information, let’s take that information down to the 4-Hour Chart. First off, the trend line is the main focus that I’m going to be looking at today. The pattern that we’ve seen here, the open and close, the challenge underneath the red trend line, and then the hook pattern that came back up to challenge the underneath side of that trend line. That’s the most important factor today because many times, in the past, this is a pattern of reversal that we’ve recognized many times in the past. The open and close under a level of support, which the trend line is essentially a diagonal level of support.
The open and close underneath a level of support. The retest as resistance underneath that area of support, which is now going to be resistance, and then we look for reversal to go back down. So, here, on the 4-Hour Chart, we saw the market push underneath here, pushing all the way back down into 1.5900. Raising back up, as it pushed towards the 1.6100/1.6120-level and the green shaded area underneath that trend line. So this becomes a clear area of potential reversal to go back down.
So, if we’re looking for a new lower high within the downtrend, this is exactly where we’re looking for here into the green-shaded area today. Selling into the green-shaded area will be the main focus. Now, it’s already come very close to it. We may not see it challenge there again, but that’s definitely the area or barrier of resistance that we’ll be looking for today. If, at any point, we see the market break above that green zone, all of that is invalidated and we’re likely looking for another challenge, all the way into the 1.6250s.
Your next area of support, of course, will be back down towards the blue-shaded area, which over here, on the left-hand side, we can see was already some support for this currency pair. But follow both of the green and the blue-shaded areas back in time; we could see historical support here. We see some resistance on the left-hand side of that green-shaded area. That’s a critical decision point. The blue-shaded area also. We’ve seen many times finding support and resistance within the blue-shaded area. So these are our two main areas to focus on. We’re closer to the green-shaded area.
Also, taking Fibonacci from the current high – the current highest high we see here on the chart – and the current low that we see down here at the bottom of this run, we find the .618 Fibonacci retracement level right at 1.6119, right at the bottom of that green-shaded area. Yesterday’s bank flow levels sitting right here. The top bank flow level at 1.6097. We have pushed through that a little bit into the 1.6120-level. If today’s bank flow levels get published later today, I would expect they’ll be closer towards the green-shaded area, maybe just on top of today’s market high, but we’ll likely see today’s bank flow levels here, close towards the 1.6120-level.
Of course that’s mere speculation, but I expect that that’s likely where they will be as long as the market continues to find resistance underneath the trend line and under that green-shaded area. So, for the day today, your expectations will be resistance into the green zone, looking for opportunities to sell under the green zone, that resistance, the .618 fib, and under the trend line to target back down to the blue zone. Beyond the blue zone, we’re back into the pink zone at the bottom. And beyond that, we could see a complete change in the pattern of the longer-term daily trend.
The risk is in this entire situation is that it breaks above the green zone and continues to pressure higher towards the highest highs. Now, if you’re looking to buy this currency pair, this is just not your place to do it today. I don’t think you want to buy it here into the underneath side of the trend line and the green zone. There’s really only two reasons that I would even consider buying this. First off would be the break of the green-shaded area. Above it, 1.6160 or so, to go back up towards the purple zone, or a dip back into support, which would be all the way back down into the low-1.6000s. 1.6020 to 1.6030 would be the next area of support for the GBPUSD Today.
