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I’m going to get started today on the Greater British Pound versus the US Dollar [GBPUSD]. Going all the way back down to the bottom left-hand side of the Daily Chart, we go back to June and July of 2013. We’re starting down here at 1.4800. We can see that this currency pair has been in an uptrend since then, moving higher highs and higher lows over the past year or so, as it pressured all the way up towards the 1.7000-level, stopping just shy of 1.7000 over the past week or so, as it capped out as resistance into the 1.6990s.
Over the past few days, we have seen a little bit of a pullback of the longer-term uptrend. A little bit of a pullback, as it’s fallen from the 1.6990s, back down into the low-1.6800s. Let’s go ahead and zoom in. Now that we see the longer-term trend, we could see that pullback over the past few days, pulling back down here to the pink-shaded area.
The blue trend line of course is the longer-term trend line, but as I say in the Trade Room all the time, and I’ll repeat it here, the trend is not the trend line. The trend is the price action. The trend is higher highs and higher lows for the uptrend. So, if you define the trend as higher highs and higher lows, and that is the price action of the trend, we can still see that we are actually still within the parameters of the uptrend. In fact, I think, as long as we stay above this last low, and I’ll put a black X here. Above this area of congestion, this area of resistance and congestion right here. As long as we stay above that, I think there’s a great opportunity for this to turn back in the direction of the trend.
Now, of course a breakdown of the blue trend line of course will give us a clue that it’s continuing to push back down, but coincidentally here, the blue trend line and that pink-shaded area that represents that historical area of support and congestion align with each other right there in between 1.6780 and 1.6830. So, that pink-shaded area will be critical for us to determine: are we still within the longer-term uptrend or are we turning down and reversing to a downtrend?
So, uptrend or downtrend? That’s the main focus, and of course here, as long as it stays above this pink zone, the blue trend line, that last area of support, then we’re looking for potential for this to rally back in the direction of the trend. So, let’s go ahead and put an arrow there. Put an arrow right here at the pink zone. As long as it stays above here, we look for potential for it to go back up in the direction of the trend. If it breaks down underneath this pink-shaded area, the blue trend line and that historical area of congestion, then we look for a turn back down in the direction of a downtrend at that point.
The Forex Black Book trend bar at the very bottom of the chart is of course green. That tells us that as long as it stays within the parameters of the uptrend, there’s potential to look for clues for continuation higher. Clues for a push back in the direction of the longer-term trend. And if we break underneath this pink zone, it’s possible, over time, we see that trend bar turn red for the Forex Black Book.
Let’s go ahead and take all of this information down to the 4-Hour Chart. And as we get down here, we can just get a closer viewpoint of those two shaded areas that we’re looking at right now, specifically the pink zone. Staying within or above it, we have support. We can go back in time and see that. We could see support here. We could see support here. We see the resistance and congestion all along the left-hand side of that pink zone. So, staying above 1.6800, 1.6830, which is the top portion of that pink-shaded area, then there’s potential support and reversal to go back up in the direction of the longer-term trend.
A breakdown of these last supports, this zone of support highlighted in pink, and I’ll say 1.6780, confirms the breakdown of the trend and we look for the continuation lower. Interesting yesterday is that our bank flow levels actually pulled away from the market a little bit. I was kind of surprised about that. A couple of days ago, we see, or Friday, we saw the bank flow levels sitting right on top of that blue zone, and then yesterday they were published and they pulled away from the market a little bit. So, I was kind of surprised to see them all the way up here, but that’s okay.
During the Trade Room, if you were here with me during the Trade Room yesterday, you’ll know that I took a sell right here into the 1.6880s, just underneath the top of that blue-shaded area. We sold it here in the Trade Room. We saw the challenge back down to the 1.6867-level. Gave you an opportunity, at that point, to move, break even if you were looking to do that. If you did or didn’t I support, at this point, you are now seeing profit all the way back down.
We’ve seen it all the way to the 1.6830-level. We need a breakdown of the pink zone if we’re going to see continued profit from the sells taken in the Trade Room at the 1.6885, 1.6887-level from the Trade Room yesterday. If it breaks back above this blue zone, we’ll look for a continuation of the uptrend and a turn back higher again. So, let’s go ahead and put some arrows here. Staying within or under the blue zone, we’re looking at resistance like we saw yesterday. Getting back above the blue zone, we look for a turn back higher in the direction of the longer-term uptrend.
So, two critical decision points today. Blue zone is resistance. Pink zone is support. A breakout of either one of those, above the blue zone or below the pink zone, we look for a continuation in that direction. The break under the pink zone continues a downtrend. The break above the blue zone turns back in the direction of the uptrend. So, buyers, if you’re a buyer right now in the market, you’re looking for buys on dips into support, likely the pink zone, or a break of resistance above the blue zone. If you’re a seller in the market, as I am, from the top of the blue zone from yesterday’s Trade Room, then you’re holding profit, protecting profit, looking for the breakdown of the pink zone. If you’re not in a sell, the next opportunity would be either a challenge once again to the blue zone, the bank flow levels later on today, when they’re published, or a break underneath the pink-shaded area today for the GBPUSD.
