Looking for longs between the 1.2864/1.29 area

FX:GBPUSD   British Pound / U.S. Dollar
179 1 8
Weekly gain/loss: - 148 pips
Weekly closing price: 1.2916
Weekly open price: 1.2920

Weekly view: Following a clear-cut weekly bearish engulfing candle, the GBP followed-through last week with a sell off, bringing the currency to lows of 1.2903. As far as weekly structure is concerned we can see that there’s a weekly resistance area at 1.3501-1.3804, while to the downside there’s little support seen to the left of current price until the market reaches the 1.20 region (to see this, one will need to re-visit 1986).

Daily view: Looking down to the daily chart , however, price recently touched gloves with a daily demand base coming in at 1.2789-1.2928. Friday’s daily candle chalked up a relatively nice-looking inverted pin bar from this area, which when formed within or around an area of interest can sometimes be a powerful indicator that a bounce is on the cards. Should this come into view, the daily resistance level at 1.3104 would likely be the next target in the firing range.

H4 view: Friday’s weaker than expected US retail sales reading boosted the GBP’s attractiveness, consequently forcing H4 price to break above the key figure 1.30. After failing to sustain gains beyond this number, however, the market tumbled lower, resulting in price rounding the week off just ahead of the 1.29 handle.

Direction for the week: We’re sure when we write this that most would agree that the weekly chart looks frighteningly bearish! While this may be true, nevertheless, daily action remains kissing the top edge of a demand zone . Therefore, until this zone has been engulfed, direction, like the EUR/USD             , is limited for the time being.

Direction for today: Despite the weekly chart’s position, our team believes that cable will likely bounce higher today/tomorrow. Here’s why:

• Price is now seen flirting with the 1.29 handle.
• Directly below 1.29 is a H4 Quasimodo support at 1.2864, which merges beautifully with a H4 AB=CD approach (see black arrows).
• The above levels are all related to a larger H4 harmonic Gartley reversal zone fixed between 1.2864/1.2935.
• And finally, let’s not forget that the daily picture is currently occupying a daily demand base at 1.2789-1.2928.

Our suggestions: Since the H4 harmonic bullish pattern has formed within a bearish downtrend we’d highly recommend waiting for lower timeframe confirmation to form before placing capital on the line. Optimal entry, as far as we can see, would be between 1.2864/1.29. Aggressive stops could be placed directly below this zone, while more conservative stops may be best set beyond the X point of the H4 harmonic pattern around the 1.2779ish area.

In regards to lower timeframe confirmation, this could be in the form of an engulf of supply followed by a retest, a trendline/break retest or simply a collection of well-defined buying tails seen around the harmonic reversal zone. This, in our opinion, will likely get you in at a better price and potentially avoid unnecessary drawdown.
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