Few months ago, the market was pushed above the weekly key zone around 1.5550 in an attempt to reach the area of 1.5900, which was providing the GBP/USD pair with a significant resistance.
The recent weekly candlesticks came as bearish engulfing candles, closing below the level of 1.5220 (the neckline of the Head and Shoulders pattern). This supported the bearish side of the market in the long term.
A long-term bearish target is projected towards the level of 1.4800 for this reversal pattern.
The previous demand level of 1.5200 (the origin of a previous bullish engulfing weekly candlestick) was broken to the downside a month ago. This bearish tendency was confirmed by the Shooting Star pattern and the bearish engulfing weekly candlesticks of previous weeks.
Hence, a quick bearish decline towards the weekly demand level of 1.4950 was expected as a result of the bearish breakdown below 1.5200.
Note that a weekly closure below 1.4950 opens the way towards 1.4800 and 1.4650 (long-term bearish targets).
On the other hand, a bullish closure above 1.4950 brings another bullish pullback towards 1.5350 especially after the previous weekly bullish rejection that was expressed at 1.4800 (the lower limit of the current bearish channel).
Recently, the key level of 1.5200 was temporarily breached to the upside before a daily bearish engulfing candlestick was expressed around 1.5330 on November 20th.
Bearish persistence below 1.5200 and then below 1.5050 (previous weekly bottom) enhanced a further bearish decline towards the weekly demand level of 1.4950 (corresponding to the lower limit of the depicted channel).
A bullish engulfing daily candlestick was expressed around 1.4950 earlier this month on December 3rd.
A bullish pullback towards 1.5200-1.5230 was expressed as the GBP/USD pair managed to hold above 1.5000 and 1.5100.
Two weeks ago, a significant bearish rejection was expressed around 1.5230. Many bearish engulfing daily candlesticks had been already expressed.
The price level of 1.4950 was broken-down last week, thus constituting a significant supply level. As anticipated, this price level offered a valid sell entry earlier this week. It’s already running in profits now.
Daily persistence below 1.4800 opens the way towards 1.4700 and 1.4650 where a historical bottom was previously located.
Risky traders could sell the GBP/USD pair on retesting of the broken demand level at 1.4950. S/L should be lowered to 1.4850 to secure some of the profits.
Initial bearish targets should be located at 1.4850 and 1.4800 where the lower limit of the depicted channel is located.
Next T/P levels are located at 1.4700 and 1.4650 as long as the GBP/USD pair keep trading below 1.4800.
The material has been provided by InstaForex Company – www.instaforex.com