- Last Candlesticks pattern: Window
- Time of formation: 27 Jun 2016
- Trend bias: Down
- Last Candlesticks pattern: Long black candlestick
- Time of formation: 24 Jun 2016
- Trend bias: Down
GBP/USD – 1.3180
The British pound found support at 1.3059 earlier this week and has staged a strong rebound, suggesting the retreat from 1.3279 (last week’s high) has ended and another test of this level is likely, above there would extend the rebound from 1.2866 towards previous resistance at 1.3372, however, only a daily close above there would signal the retreat from 1.3481 has ended, then further gain to this level would follow but upside should be limited to 1.3640-45 (38.2% Fibonacci retracement of 1.5018-1.2795).
On the downside, whilst pullback to 1.3190-00 is likely, reckon 1.3120 would limit downside and bring another rebound later. Only below support at 1.3059 would revive bearishness and suggest the rebound from 1.2866 has ended, bring weakness to 1.3000, then 1.2975-80, break there would add credence to this view and further fall to 1.2900-10 would follow. Looking ahead, break of said support at 1.2866 is needed to signal medium term downtrend has resumed for retest of recent low at 1.2795.
Recommendation: Exit short entered at 1.3175 and stand aside for now.
On the weekly chart, cable’s rebound from 1.3059 (this week’s low) suggests near term upside risk remains for the recovery from 1.2866 (last month’s low) to extend gain to 1.3372 resistance, however, as outlook remains consolidative, reckon upside would be limited to previous resistance at 1.3481. If this level is penetrated, this would signal retracement of recent selloff is underway and bring further gain to 1.3534 resistance and later towards 1.3640-45 (38.2% Fibonacci retracement of 1.5018-1.2795).
On the downside, expect pullback to be limited to 1.3160 and 1.3120 should hold, bring another rebound later. Only below 1.3059 support would signal the rebound from 1.2866 has ended, bring weakness to 1.2950, then towards this support. Looking ahead, only a drop below 1.2866 would signal correction from 1.2795 low has ended, bring retest of this recent low later, break there would extend major downtrend to 1.2680-85 (1.236 times 1.7191-1.4563 measuring from 1.5931) and possibly towards 1.2500, however, reckon 1.2430 (1.236 times projection of 1.5930-1.3836 measuring from 1.5018) would hold.