Hello and welcome to the latest issue of YTE! I hope you’re well. In this article we will be looking at the current state of the GBP/USD currency pair with a view to identify upcoming trading opportunities as we move towards the revised 23rd May Brexit deadline.
Firstly looking at the GBPUSD 4hr chart (Figure 1) we can see the pair has been trading within a triangular consolidation pattern between support at 1.2970 / 1.3 region and resistance around 1.3330 area. These levels were respected by the market throughout the month of March and early April. Most recently given the surge of value on the USD, the GBPUSD currency pair has finally been able to break the 1.2970 support region to test the 1.2870 level in late April. This break of support is regarded as a significant decline for the pair resulting in a cross of our Daily 20 & Daily 50 EMAs, which many would regard as a bearish signal. As you can see on the 4hr chart, I have applied our Fibonacci retracement indicator from the most recent high at 1.3130 to the low at 1.2685 which further reinforces the confluence of resistance in the 1.3 region. This area of resistance derives from the previous area of support which is likely to act as resistance in itself but further overlaps with the 50% & 61.8% Fib levels and also the Daily 20 EMA, as shown by the green rectangle on the chart. We expect to see further bearish price action as the market re-tests the 1.3 region and at the very least we would expect to see another challenge of the 1.2865 level.
Figure 1 – GBP/USD 4hr chart
Now if we take a look at the bigger picture on the Daily Chart (Figure 2) we can see that the next level of support is in fact at 1.2770, which is the low from February 2019 and could also be used as a slightly longer-term target if we were to see a clean break of the 1.2865 level. Below that we also have the swing low at 1.2440, which was tested in January of this year. However, we don’t expect to see the market move to this level unless we were to leave the European Union without a ‘deal’.
Figure 2 – GBPUSD Daily Chart
On the balance of probability, as long as the pair remains below 1.3, we expect to see a challenge of 1.2865 and 1.2770 as interim targets for short positions and we will be looking for entries on lower timeframes to build positions.
As always plan your trade and trade your plan
Hemal Pandya is an independent forex trader specialising in shortterm and medium-term trading opportunities. As managing director of Alpha Markets, Hemal runs various Forex training courses and mentorship programs, and operates the Alpha Trading Floor: www.alphatradingfloor.com.