Weekly closing price: 1.4162
In a similar fashion to the EUR/USD , the British pound performed strappingly last week. The unit managed to record its sixth consecutive weekly gain and drive beyond a weekly plotted at 1.4079 (now acting support). Despite the pullback from highs of 1.4344, last week’s move could have possibly cleared the path north for weekly price to challenge the 2016 yearly opening level marked at 1.4732.
In order for market action to climb to fresh highs, nevertheless, you can probably see that a daily coming in at 1.4393-1.4297 would need to be removed. Should this area manage to remain in the game this week, however, there’s a chance that daily price may slide below weekly support and look to approach daily support registered at 1.3878.
Over on the H4 timeframe, we can see that following US President Trump’s comments about a strong dollar, the pair chewed through the 1.42 handle and challenged 1.41. Price attempted to reclaim losses on Friday, but failed ahead of 1.43, despite UK prelim GDP q/q figures surprising to the upside.
The closing break back below 1.42 will likely attract further selling down to the 1.41 region today/early this week (note that directly below is weekly support at 1.4079).
Traders may have also noticed that H4 price is on track to complete a H4 formation (black arrows) that terminates around the 127.2% Fib ext. point at 1.4009 (a few pips ahead of the large psychological number 1.40). This would imply a potential fakeout beneath weekly support (and break of 1.41), likely triggering a truckload of stop-loss orders along the way!
In light of the above, we believe the pair is a high-probability buy around the 1.40 mark. Just to be clear though, a mild fakeout is likely to be seen through this number as this is common around psychological bands. For that reason, try to avoid entering based on a pending order. Instead, wait and assess the H4 candle reaction from 1.40 before pulling the trigger.
Data points to consider: US core PCE price index m/m at 1.30pm GMT .