Potential whipsaw through 1.23 brewing

11 thg 5, 2020

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

Although March clocked levels not seen since the 1980s, ahead of a 127.2% Fib ext. level at 1.1297, price staged an impressive recovery and regained approximately 80% of the month’s losses.

Support at 1.1904/1.2235 remains in motion in May. Neighbouring resistance can be seen in the form of a trendline (1.7191).

Concerning the primary trend, lower peaks and troughs have decorated the monthly chart since early 2008.

Daily timeframe:

Partially altered from previous analysis -

Upside momentum recently diminished as the pair crossed paths with the 200-day simple moving average (SMA) at 1.2649, a value that boasts a close connection to a demand-turned supply at 1.2649/1.2799.

Price action heading into Tuesday is currently consolidating ahead of demand at 1.2212/1.2075.

H4 timeframe:

Supply at 1.2477/1.2438 welcomed price action Friday, delivering a robust move to the downside on Monday and wrapping up a touch off worst levels just north of demand at 1.2147/1.2257.

As you can see, a violation of the current demand area could lay the basis for additional downside this week towards fresh demand found at 1.1771/1.1886.

H1 timeframe:

An early rebound from 1.24 took shape Monday, technically fuelled by strong confluence, including the 100-period simple moving average (SMA), a local trendline resistance-turned support (1.2418) and a 38.2% Fib level at 1.2391. Things turned sour ahead of 1.2450, with the London open forming a full-bodied H1 bearish candle through 1.24 that eventually led to a test of 1.23 heading into US trading.

Pattern traders may also acknowledge the local descending triangle forming around 1.2350. A descending triangle is a bearish formation usually formed during a downtrend as a continuation pattern. However, there are times a descending triangle may represent a reversal pattern at the end of an uptrend.

Structures of Interest:

Monthly price exhibits scope to approach 1.2235 (the top edge of support), while daily price also suggests the possibility of a move to 1.2212 (the upper edge of demand).

H4 demand at 1.2147/1.2257 has ‘test me’ written all over it. Between the top edge of monthly support at 1.2235 and the upper layer of H4 demand at 1.2257, we have a potential reversal zone. This would, however, entail whipsawing through 1.23 on the H1 timeframe.