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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, we could see that this currency pair has been in an uptrend for quite some time. We go all the way back into July of 2013, at the bottom of the chart, into the 1.4800-level. We began the climb over the past several months. We’ve seen the push all the way up here to the top right-hand side of the chart into the mid to upper-1.6600s.
Now, over the past few weeks, we’ve had some difficulty with resistance up here at the top right-hand side of the uptrend. Several weeks ago, back into late December, we saw three days where it attempted to break through this pink-shaded area at the very top of the chart into the mid to upper-1.6500s. Had a little bit of a difficult time there. Started a little bit of a downward push as it pushed all the way back down here into the mid to low-1.6300s. The purple-shaded area here. That held as our last support.
Then we began a new rally higher as it pushed through the pink-shaded area, challenged it as resistance, pushed through it, challenged all the way up into the mid-1.6600s, and now, once again, late last week we saw the fall back underneath the pink-shaded area. I think what’s most significant about this to me, and I’m going to go and zoom it in a little bit so we could see this a little bit better. I think what’s most significant about this area to me is that we never saw the market clearly open and close above that pink-shaded area. The top of the pink-shaded area is right around the 1.6580-level.
We saw the blue candle – the bull candle – push above the pink-shaded area, above that 1.6580-level. The next day we saw the open and then the turn right back down. This is Friday’s candle. We saw the open above the pink zone and then get right back under the pink-shaded area. So, what’s significant to me is over the past several weeks, going as far back as December, we have not seen a clear candle body open and close here on the Daily Chart above that pink-shaded area. And it’s my expectation that as long as it doesn’t clearly open and close above there, there’s still potential for resistance.
The market is having a difficult time breaking through that barrier. It’s attempted to with the last two daily candles, but it hasn’t satisfied a clear break of it. So, today we can see the market opened up down here around the yellow-shaded area, into the upper-1.6400s. We’ve rallied back into that pink-shaded area that historically has held as resistance, so we’re retesting or challenging once again this major area of resistance that, so far, the market has been unable to have a day that opened and closed above there. We’ve seen it close. We’ve seen it open. But not a single full candle body open and close above there.
So, it’s my expectation. As long as it doesn’t do that, there’s still potential resistance and potential for reversal. Now, if I’m a buyer in the market, which obviously there’s been lots of buyers in the market because it has been in a uptrend. If I’m a buyer in the market, I’m waiting for two opportunities to buy this currency pair. It either needs to do one of two things. It needs to dip down here to support again, which I think would be all the way back down to the yellow-shaded area back into the mid to upper-1.6400s. It either needs to dip back down there closer to the trend line, closer to historical resistance, acting as support. That becomes a fairly low risk, high reward buying opportunity, because as it dips down there, your stops become smaller and your profit targets become larger.
So, a dip down to the yellow zone becomes a very profitable opportunity. Lower risk, higher potential reward opportunity to buy it. The other opportunity to buy it would be waiting for exactly what I was just talking about. The open and close clear candle body above the pink-shaded area. And as long as it doesn’t do that, there’s still potential to find resistance and turn back down to the yellow-shaded area. So, those are your two opportunities to buy the GBPUSD today and maybe even through the rest of the week. Dip to the yellow zone or open and close – Daily Chart – above 1.6575, 1.6580-level, and above that pink-shaded area.
On the other side of that, if you’re saying, “Well, maybe this uptrend is exhausted and we’re looking for reversal to go back down,” the same areas are critical decision points for you also. As long as we stay within or under that pink-shaded area at the top, which goes between the 1.6540, 1.6580-level there’s potential clues to resistance and reversal to go back down, and then you target back down to the yellow zone or lower. The other side is looking for sells on the breakdown of our current support, which is that yellow-shaded area and of course the blue trend line.
One last thing here on the Daily Chart before we go down to the 4-Hour. I have taken Fibonacci measurements from the low here, where the black X is and the blue trend line. Taken Fibonacci from that low to the most recent high. We find the .236 fib sitting right at 1.6475. That’s our current support – top of the yellow zone. That’s the .236 fib of this last uptrend leg that we see right there. .382 is all the way down into the purple-shaded area – 1.6356. So, definitely some hints of support based on Fibonacci here on the Daily Chart.
Let’s go ahead and take this down to the 4-Hour Chart. Nothing really changes. We could see the pink-shaded area. Let me get these arrows back where we would expect them to be. They kind of move around when we shift compressions. Pink-shaded area obviously today is holding as support. We could see that right now. Staying within or under it, as I mentioned, we’re back to the yellow-shaded area. Breaking the yellow-shaded area, we look for it to go back down. Above the pink-shaded area. We’ve already seen it on the 4-Hour above there and it was a false breakout. Getting above there again, specifically on the Daily Chart, gives us a clue that it’s going to continue to go back up again in the direction of the trend. Staying under the pink zone, we’re back to the yellow zone. Under the yellow zone, we go lower.
One last thing I want to do here is take a look at two things. First off, the bank flow levels. The past three days. Take a look at the bank flow levels the past three days. Sitting on top of this pink-shaded area, and it has been a clue that the sellers are looking to jump back in and drive this back down. The past two days we saw the bank flow levels here and the market push well down here into the yellow-shaded area. So, very interesting there. Today’s bank flow levels could give us another clue of what’s happening. If the bank flow levels come out similar to Friday’s or even Thursday’s, here just above the yellow-shaded area, once again it gives us a clue that sellers may be looking to drive this back down.
Let’s go ahead and zoom it in one time here. I also want to take Fibonacci measurements of the last little down leg. From the high down to the most recent low and the yellow-shaded area, 50% sits at 1.6570. .618 sits at 1.6593. Anything above the pink-shaded area and above those fibs, we’re likely challenging the highest high, which sits all the way up here into the 1.6635-level. And of course a break above that, we’re back towards the 1.6700-level for the GBPUSD. So, definitely some things to think about, but I think most importantly today is this pink zone. Staying underneath 1.6580, we challenge back to the 30s and underneath the pink-shaded area, we’re back down into the 1.6400s for the GBPUSD today.
