Few months ago, the market was pushed above the weekly key zone around 1.5550 in an attempt to reach the area around 1.5900, which has been providing evident resistance for the GBP/USD pair.
Previous weekly candlestick closure above 1.5500 hindered further bearish decline and enhanced the bullish side of the market towards 1.5670 (previous weekly high) and 1.5780 (61.8% Fibonacci level).
Recent weekly candlesticks came as bearish engulfing ones, closing below the level of 1.5450 (Head and Shoulders neckline).
It supports the bearish side of the market in the long term. For the reversal pattern, an approximate projection target should be located at the level of 1.5050.
In the short term, the nearest demand level to meet the GBP/USD pair is located around 1.5170 (recent weekly bottom and the origin of a bullish engulfing WEEKLY candlestick).
Weekly persistence below 1.5500 is mandatory to allow further bearish decline to occur.
Previously, the zone of 1.5800-1.5880 acted as significant supply. It offered a valid sell entry few months ago. All T/P levels were successfully reached.
The level of 1.5550, which corresponded to the 50% Fibonacci level and the previous prominent top, was temporarily broken enabling further bearish decline towards 1.5350 where an ascending bottom was established.
Prominent supply/resistance around the level of 1.5770 (prominent 61.8% Fibonacci level) where the right shoulder of the depicted bearish reversal pattern is observed.
That is why, a valid sell entry was suggested for retesting at 1.5770 three weeks ago. All of its targets were successfilly achieved.
Moreover, the previous bearish movement found its way towards the level of 1.5200 (prominent demand level), which prevented further bearish decline.
Instead of it, evident bullish rejection took place (bullish engulfing daily candlesticks) leading to the recent bullish pullback towards 1.5560, which provided the current extensive bearish rejection.
Price action should be watched around the price level of 1.5170 as it corresponds to a previous weekly double bottom. A valid BUY entry can be offered if enough bullish rejection is expressed around these levels.
A valid sell entry was suggested around the zone of 1.5550-1.5580 (recent resistance zone). It is already running in profits.
T/P levels to be projected towards 1.5200 (achieved), and 1.5050 while S/L should be lowered to 1.5460 to offset the risk.
The material has been provided by InstaForex Company – www.instaforex.com