The GBP/USD pair has been moving downwards respecting the depicted bearish channel since mid-September when the ongoing channel was initiated. Many bearish impulses were previously initiated around 1.6450, 1.6170, and 1.5940 where the upper limit of the channel came to meet the pair.
The price zone of 1.5890-1.5870 constituted a transient daily support that paused the bearish movement for a few days. However, bears quickly managed to push lower.
Bullish fixation above 1.5890-1.5900 was essential to maintain the bullish scenario. However, bears have failed to do so. Instead, the market pushed towards the next support level located around 1.5600 where the lower limit of the ongoing channel is located.
The GBP/USD pair looked quite oversold. Bullish correction was anticipated as the pair has tested a prominent WEEKLY support ( price level of 1.5600 ) corresponding to multiple previous tops established back in May and June 2013.
Bullish Four-Hour fixation above price level of 1.5710 ( Last Friday’s highest price level ) confirms the possible multiple-bottom pattern on the 4H chart. Projection target of such a bullish pattern will be located around 1.5890.
On the other hand, a break below the recent bottom around 1.5590 invalidates this bullish scenario and renders the current movement as a bearish flag pattern with projection target at 1.5410.
Bullish fixation above the price zone of 1.5670 – 1.5710 (Friday’s highest price level) indicated a bullish corrective movement with bullish target level initially located around 1.5880. Stop Loss should be set as daily closure below 1.5590.
Another BUY opportunity should be offered at retesting of the same price zone 1.5610-1.5620 (which is taking place today) with the same Stop Loss and TP levels.
The material has been provided by InstaForex Company – www.instaforex.com