Naw, ya ain’t getting a case of déjà vu, dawg. That there is an updated chart of yesterday’s setup for GBP/USD. And if y’all can still recall, we wuz lookin’ to go long when the price was close to the descending channel’s support area at the 1.2000 major psychological level. And as y’all can see, the pair moved for almost 400 pips since. Aww, yea! 300+ pips in 24 hours! We got bank, dawg! That’s right!
Anyhow, I also implied yesterday that the trend may shift to an uptrend if price clears the 1.2300 level. And, well, bullish momentum was so strong that the pair just breezed through that like it was nuthin. However, bulls are gonna have an uphill battle from here on out. Why? Well, as y’all can see, the 1.2400 and 1.2500 major psychological levels both happen to have significant market interest.
The pair is presently at 1.2400. It could still move higher, but since stochastic be indicating overbought conditions already, there’s a chance that resistance will form at 1.2400 and a pullback occurs. If that happens, then the pair will likely be pulling back to 1.2200 (or 1.2190 based on yesterday’s chart), which happens to line up rather nicely with the 50% Fibonacci retracement level. In addition, if price pulls back all the way there, then we’ll also be getting a break-and-retest setup, based on that there broken descending channel. Just be wary if the pair smashes past 1.2200 with great momentum, since that could mean that bears are trying to push the pair back into the channel.
If you’re more bearish on the pound, then how about that there descending channel for GBP/CHF? Last time we played with GBP/CHF was on December 20, which is a really long time ago (by intraday standards). And back then, we had a downside breakout from that there highlighted rectangle pattern as one of our scenarios. Y’all probably can no longer recall (unless ya found a trade, that is), but I also warned y’all to be wary until the pair smashes past 1.2600. And, well, the pair moved almost 500 pips lower from 1.2600, so give yo self a pat on the back if you wuz able to ride the down move.
In the process of moving lower, the pair has formed a fresh descending channel for us to play with. And presently, the pair is gunning for the channel’s resistance area. Today’s play is therefore to start looking for opportunities to go short on the pair once it reaches the channel’s resistance area, which should be around the 1.2450 level. But if we apply our awesome Fibonacci tool, we can also see that price is currently at the 50% Fibonacci retracement level. Moreover, 1.2380 has also been an area of interest in the recent past. There’s therefore a chance that price may start moving lower without ever reaching the channel’s resistance area. And our technical indicators seem to support this scenario. For one, the moving averages are in downtrend mode, with the 200 SMA seemingly acting as dynamic resistance. Another is that stochastic is already indicating overbought conditions and all that. In any case, just make sure to practice proper risk management, a’ight? Peace! I’m out!
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To get the complete picture and avoid getting blindsided by economic data, you also have to do your fundamental analysis. Lucky for us, Pip Diddy fills us in on what we need to know about fundamentals with his Daily Forex Fundamentals.