The GBPUSD showed a strong reversal candle last week Friday. The bears were totally in control that day due to the massive wick on top of the candle and the candle close very near the low. Despite the reversal signal, price has not been able to break the low nor the high of that Friday daily candle: price has made four inside candles in a row (purple box in screenshot). What is next for the Cable: will the intermediate uptrend trump the longer-term downtrend or will it be the opposite?
We saw some great comments and analysis on Nathan’s NZDUSD contest question. Although no prizes are dealt out for this one, I am hoping to see the same participation: will the GBPUSD hit the top (blue) or the bottom (red) first? Please post your comments down below!
MY VIEW GU WEEKLY
The weekly chart shows a strong uptrend which is followed by a very impulsive fall (green arrow and red arrow on chart). A pinbar near the 50 Fibonacci level (blue arrow) could spell trouble for the bears but last week’s candle had a big wick on top of the candle (purple arrow). Conclusion: both sides seem to be struggling for control on the weekly chart.
MY VIEW GU DAILY
The daily chart is showing a different picture. The downtrend is visible and evident with clear lower lows and lower highs (red circles). The retracement rally however has posted a higher low (blue circle) in the mean time, which is indicating a wedge (red and blue lines). A wedge is always a sign of indecision.
MY CHOICE: BREAK TO THE DOWNSIDE
There are, however, a few factors that make me favor the downside break of the wedge.
- There was strong bearish moment and downtrend prior to the wedge. There is a (slightly) higher chance that this bearish momentum will push price back into another bearish fall.
- The very last part of the bearish trend (prior to the wedge) was the strong and steepest price action of the entire downtrend. This too increases the odds of the downtrend prevailing.
MY CONFIRMATION
I am placing importance on the bearish candle of the Wednesday’s daily candle. In my opinion that candle shows a decent chance of downtrend continuation but more confirmation is needed. In this case confirmation would be the trigger, which is the break of the support trend lines and bottoms. Hence when price is able to push through the support levels of the 4 hour chart (various blue lines), I think short trades look good. The main horizontal support level I am monitoring is the first bottom (dark blue circle) after the bearish impulse on the 4 hour chart (red arrow). Long trades do not look appealing to me unless price breaks above last week’s high (red circle here below). Please see this chart for an easier reference:
We saw great comments and analysis on the NZDUSD so we are hoping for the same performance from you this time around. Please drop in your great analysis down below! Thanks and wish you Happy Trading.
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