1.30 back in focus for potential shorting opportunities

23 thg 2, 2020

GBP/USD:

Monthly timeframe:

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

Early February 2018 saw the pair reject 1.4520/1.3893, a 50.0% retracement and 38.2% Fibonacci retracement combination (red). This, along with trendline resistance (2.1161), remains a well-rounded resistance area to keep an eye on long term.

In recent months, we’ve seen a recovery form off 1.1904/1.2235, clocking highs of 1.3514 in December 2019 and breaking the 1.3380 March 2019 high.

Currently, the pair trades at -1.88% on the month.

Daily timeframe:

Demand at 1.2823/1.2910, represents the lower edge of a multi-month range (supply at 1.3303/1.3184 caps upside), contained downside last week, staging a healthy advance to highs at 1.2981 and snapping a four-day losing streak.

Local trendline resistance (1.3514) could make an appearance this week, as could the supply zone mentioned above at 1.3303/1.3184. Beyond the current demand, another port of demand, a touch larger than the current, resides at 1.2649/1.2799, which happens to house the 200-day SMA (1.2688).

In terms of the RSI indicator, since the beginning of the year we have been compressing within a descending channel (black lines), with the value currently rejecting its channel support.

H4 timeframe:

After dethroning demand at 1.2868/1.2894 last Thursday and leaving demand at 1.2806/1.2833 unopposed, GBP/USD set off to the upside Friday, benefitting on the back of upbeat UK flash manufacturing PMIs and the dollar’s demise across the board.

Buyers appear to have lost their flavour ahead of supply at 1.3023/1.3006, fading highs at 1.2981 and closing the session in the form of a moderately dominant bearish candle.

It may also interest some traders to note that we likely have sellers attempting to fade the recent pullback from 1.2849, due to the 1.3070 double top formation recently confirming (breaking the 1.2872 low, the trough between the two peaks, marked with a blue arrow, offers double-top confirmation). The take-profit target (1.2672) for confirmed double-top patterns can be calculated by taking the distance between the highest peak and the trough and projecting this value south of the trough.

H1 timeframe:

Friday lifted through orders at 1.29 in early London, and eventually ran through both the 50/100-period SMAs until reaching demand-turned supply at 1.2965/1.2987 going into the US session. Note this supply zone is stationed a touch south of the key figure 1.30.

Direction:

Longer term:

Longer term on the daily timeframe the unit exhibits scope to explore higher ground this week, aiming for a retest at trendline resistance (1.3514). However, the fact the February 11th rebound failed to post fresh highs indicates possible weakness out of the current demand.

Shorter term:

The key figure 1.30 is likely watched by many traders today/early week as possible resistance, even more so when price-action based traders take into account we also have supply on the H4 drawn from 1.3023/1.3006 encapsulating any whipsaw that may occur above 1.30 this week.

Buy-stop liquidity above 1.30 will likely provide enough fuel for larger sellers to fade the H4 supply area at 1.3023/1.3006, with the possibility of a sizable selloff emerging, based on the recent (H4) double-top’s take profit target suggesting moves to as low as 1.2672, seen deep within daily demand at 1.2649/1.2799.