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GBP/USD Assessing Reversal
- 4H and 1H: Another choppy week. The pair rallied in the European session after the Asian session started with low volatility. The previous post mentioned support at 1.6650. The market pushed the pair to 1.6618 and reversed. This could be the correction rally anticipated in that post. (Refer to Daiy Technical Update 12.03.2009 GBP/USD.)
- The pre-US open hour stopped this correction rally. Actually, this hour established this rally as a correction rally, because if it kept going to the 1.6700 area, it would rather be defined as a rally from support to resistance of a range. (Positive US jobs data helped.)
- The reversal candle in both 1H and 4H time-frames are significant short-term bearish signals, and a decline to the 1.6470 area would reach a 78.6% retracement. This would be a bullish Gartley.
- Here we can stalk any subsequent rally, and if this rally is weak, then we can consider the bearish mode. If the rally is rejected at resistance levels such as the 1.6620 area, or a declining trendline, or a retracement level (78.6%), which all converge next week in the 1H time-frame.
- For trader’s who considered the bearish case earlier in the week from early signals would have had to weather an exposure of at least 120-130 pips.
- For such volatile short-term action, switching down to 15 minute charts to observer intra-session action may help you notice the details of the choppy movements. For example the anticipated decline from today’s levels to 1.6470 should be considered in the 15 minute time-frame.
- Next week, support and resistance are converging in the 4H time-frame. There was an attempt this week, but it failed after temporarily penetrating support line. A break below targets the 1.6280 level.
Fan Yang
Currency Analyst,
Commodity Trading Advisor