GBP/USD May Consolidate Before It Continues Dropping To The Next Support

The support at 1.2720 stopped the depreciation of the pair, if only temporary. After the pair rebounded to 1.2870, which is practically the first resistance level to the upside, today the GBP returned toward the support at 1.2720.

It is more than clear that the move north was corrective, but I suppose that the pair will consolidate between the abovementioned levels for a little while longer. There may be a test of the resistance levels at 1.2850 and 1.2920, which is made clear on the H4 time frame.

On the larger time frames, however, the pair remains very bearish, and the next support zone toward which the pair should head for after the end of the correction is around 1.2600 – 1.2570.

The alternative scenario is for a continuation of the depreciatin without a deeper correction.

The GBP/USD Downward Trend Should Continue

The pair entered the support zone around 1.3020  -1.2990>>>  and I think it should begin a correction to the upside.

Unfortunately, I also think the butterfly won’t reach its limit completely, the downward trend is very strong and the pair appears to be heading inexorably to the downside to test the historical low at 1.1986 from 1st January 2017.

A signal for a renewal of the downward trend would be the breakout below the RSI divergence on the D1 time frame.

If the pair breaks out below the support around 1.3020 – 1.2990 we could expect the next strong support zone for the GBP to be the zone around 1.2750 - 1.2650.

There Are Two Scenarios For The GBP At This Stage

The hike of the interest rate of the Bank of England and the monetary policy report not only did not have a positive influence on the GBP, which, instead of rallying, it fell compared to the USD with almost 110 pips and has almost reached the support zone around 1.3020 – 1.2990>>>  as I thought it would last week.

At the same time the RSI divergence on the D1 time frame remains at this stage.

I think that now there are two scenarios for further development:

The first scenario is for a test of the local low at 1.2957, a formation of a double bottom and then a trend reversal with a target at 1.3570.

The other scenario is for a breakout below the local low and a continuation of the depreciation toward 1.2750 – 1.2700.

GBP/USD Will Test The Support In The Zone Around 1.3020 – 1.2990

The behavior of the pair clearly shows that it may test the support in the zone around 1.3020 – 1.2990 which has been marked on the D1 time frame.

The RSI divergence on the D1 time frame remains valid for the moment, but I expect that during the move to the downside the indicator will test its trend line marked on the same time frame once again.

After that there are two possible scenarios to keep in mind: if the support holds the pair will begin moving to the upside to reach the limit of the butterfly pattern and the limit of the divergence>>>

Next week we will find out which scenario the market will pick.

I Expect GBP/USD To Rally To 1.3362

My first argument in favour of that expectation is the Pesavento butterfly that appeared on the H4 time frame. The harmonic pattern fits all conditions, the mandatory of which is the level of point B compared to the XA ray: 0.786. The pattern fits the rest of the conditions for the formation of the A, C and D rays. The target of the butterfly is point A at 1.3362.

My other argument is the RSI divergence on the D1 time frame between three lows compared to the price, the limit of which is at 1.3395 and is higher than point A.

If the pair cannot break out above the dynamic resistance at 1.3180 it could depreciate toward 1.3080 - 1.3040 to gather liquidity to test the resistance in the zone around 1.3370 – 1.3380 after which it will continue rallying to reach the target of the Pesavento butterfly.

I Expect A GBP/USD Rally To 1.3500 Followed By Another to 1.4000

The depreciation from 1.43760 to 1.29572 reached and went over the limit of the trend channel, and in the meantime the pair reached a strong support level on the monthly time frame.

At the same time the RSI indicator on the D1 time frame formed a divergence between three lows and the GBP started rallying.

I think this rally will continue during next week and the first resistance to the upside is the zone around 1.3500 – 1.3550.

If the pair breaks out above that resistance we may see a rally to 1.33950 – 1.4000. Such a rally would also test the support trend line the pair broke out below and it would also reach the limit of the RSI divergence on the D1 time frame.

GBP/USD Found Support At 1.32040 And Began A Correction

The pair broke out below the trend channel in the zone around 1.3675, continued depreciating and found support only once it reached 1.32040.

The first target of the correction to the upside – 1.3450 – has already been reached, but I think this won’t be the end. I expect the corrective move north will continue toward 1.3550 – 1.3600 after which the downward trend will be renewed.

The 1.32 level is a very strong support both on the W1 and monthly time frames and if the pair manages to break out below it and remain below it we could expect that the downward trend will continue with a test of the support in the zone around 1.1985 – 1.2000.

The alternative scenario is for a renewal of the medium term rally of the GBP to 1.3820 – 1.3850.

GBP/USD Is Developing A Bearish Trend With Initial Target 1.3050 – 1.3000

After the breakout below the trend channel GBP/USD continued depreciating, I think the strong support level will be around 1.3350 – 1.3330.

I expect that the pair will rebound from that level back to the trend line it broke out below (in red).
For the moment, however, the main trend remains bearish and in the medium term we could expect that after the test of the breakout the pair will renew its depreciation toward 1.3100 – 1.3050. If the support holds out we may see a renewal of the upward movement.

In the alternative scenario there will be a breakout below that support and in the long term the pair will test the lowest levels it reached in the beginning of 2017.

I Expect A Bullish GBP/USD Correction

GBP/USD broke out below the trend line of the upward channel that formed from 1.19914 - 1.43762 and the main trend is bearish for the moment.

Despite that the pair reached a strong support at 1.3420 on the W1 time frame and the bar that formed above that support is a signal for a possible bullish correction.

On the D1 time frame there are bars which confirm the expectation for a corrective rally. The priority scenario is here is for a rally for the pair to test the breakout – i.e. a rally to 1.3720 – 1.3750, after which we could expect a renewal of the downward movement to 1.3200 – 1.3150.

The alternative scenario is for a direct depreciation toward 1.3200 – 1.3150 but at the moment that appears less probable.

GBP/USD Could Drop To 1.3850 – 1.3800

GBP/USD once again could not break out above the resistance zone around 1.4345 – 1.4376, which can be seen clearly both on the W1 and monthly time frames, and renewed its depreciation.

The possible scenarios considering this development are:

A third test of the resistance is also possible, leading to a breakout and a rally to 1.4500-1.4550.
There may not be a third test and the pair will continue depreciating to the support trend line (in red) around 1.3850 – 1.3800.

In case there is a breakout below the trend line we could expect a depreciation to 1.3200 – 1.3150.

In my opinion, the drop to the trend line and a breakout following that drop is the more probable scenario. That is a long term scenario that can be used to make a significant profit.

The GBP/USD Rally May Reach 1.4400 – 1.4450

GBP/USD is testing the resistance at 1.4240 – 1.4245 and I think if it breaks out above it the pair could continue moving north to the resistance trend line of the channel (in red). If that happens, I think we could expect a rally to 1.4400 – 1.4420.

Even though the GBP/USD rally appears corrective at this stage there are two possible scenario for further development.

In the first scenario there will be a breakout above the trend line and a sharp rally of the British currency. In my opinion, that scenario should not be ignored since when it comes to the development of this pair there are quite a few political factor.

In the second scenario the pair could reach the resistance trend line and then to begin falling to the support trend line at 1.3850.

GBP/USD Continues Developing Within The Trend Channel

GBP/USD continues developing within the trend channel from 1.19858 (January 2017) and until now the pair has broken out above the resistance trend line just once reaching a local high at 1.43452.

The scenarios that could develop from now on are the following:

The pair could test the trend line for a second time and in case it succeeds in breaking out above it, it could continue its move north to the upper side of the resistance zone (in blue) between 1.4650 and 1.4700.

In case the test is unsuccessful the pair could renew its depreciation to the support trend line of the channel around 1.3770 – 1.3800.

GBP/USD Continues Developing Within The Trend Channel

One inverted bearish hammer bar on the W1 time frame hinted that at this stage GBP/USD is done depreciating and warned us to open long positions.

The pair rose with over 60 pips and at the moment it has reached a resistance at 1.39, obviously making an attempt to break out above it.

I think that the pair will reach 1.3920 – 1.3925 but before a further move north there will most likely have to be a correction.

If the pair breaks out above 1.3925 the next levels it will aim for are 1.4000 and 1.4050.
To the downside are the support levels at 1.3850 and 1.3800 and the support line of the trend channel (in red).

A RSI Divergence On The H4 GBP/USD Time Frame Is A Signal For A Drop

GBP/USD reached the resistance zone around 1.3950, which I mentioned in my last analysis of this pair, and when that happened a RSI divergence formed between three highs of the indicator compared to the pair’s chart movement.

The possible drop that this divergence is a signal for could reach 1.3550.

On the larger time frames, however, there is no signal that the pair’s rally is over, so for now we can only expect a corrective depreciation, after which GBP/USD could keep moving north to 1.4050 – 1.4100.

In my opinion a further deepening of the depreciation is not very likely, at least for the moment.
We should also observe the trend lines of the RSI divergence. In case there is a breakout to the upside that would mean a renewal of the rally without reaching the limit of the divergence.

GBP/USD Is Close To a Key Resistance Level

GBP/USD is clearly aiming for the key resistance around 1.3950 – 1.4000 and toward the resistance trend line and it has almost reached that zone.

Said zone is marked on one side by the resistance trend line of the trend channel (in blue) and from the Bollinger Bands indicator on the monthly time frame on the other.

 I think that if it manages to overcome that zone that will be both a break out above the trend channel and a signal that the pair is renewing its move north, after a year and a half of depreciation.

In the alternate scenario there will be a drop from the resistance zone to the support trend line (in red) and after a possible breakout there will be another drop to 1.3050-1.3000.