GBPUSD has had divergence in correlation to the DXY and EURUSD for a while. Since last year it has not been making any deep retracements taking out major key lows only making higher highs so using a higher timeframe we can look for areas that it could be reaching for. If you go back to May of 2018 we have double tops formed showing a clear sign of resistance. We can frame the idea that GU is reaching for those double tops to take out the liquidity in that area. If you look a little more left you will see that the double tops were formed inside of a gap which indicates price was not traded in that area. We know the market seeks liquidity and that is the most obvious area that the market is close to right now. As of 2/23 the Asian session range was 123 pips at the time of writing this post when the ADR (Average Daily Range) is 100 pips so in one session the ADR was filled. Not on that but there was a 30 pip wick at 1:00 GMT (8 pm est). That wick is an indication that price only shot up to clear orders in that area. Being inside a sell zone on the daily we can suspect that this was a set up for a short term sell making traders who were waiting for a 3rd touch on the daily resistance think they missed their sell and making them chase the market. The market being so close to those double tops and reaching for it for a whole year, I don't see them not taking it out 1st before actually selling because the people who got in the sell now most likely put their stop loss right above the double tops since that is a common area to place them. So I see the market possibly reversing for a few day but stopping before that area of consolidation around 1.37 and shooting back up to the red line area for the true sell. Once that area of consolidation is broken that will let me know to look for only long term sells. If the market shoots through my bank Icon I would Then look for a retest off the gap area and look to be a buyer to the next level of resistance.
Comment:
The market is now in the rejection zone i was looking for it to push to. I don't typically trade on Fridays but I will be monitoring the reaction off this zone for a potential reversal. If it does start to reverse today I will look for a opportunity to buy on Monday even though I typically don't trade mondays either. I would then only look for buys until the resistance on May 2018 is broken then look for the true sell.
Comment:
My last comment is playing out so far, Monday we created a low with today, (Tuesday) London open wicking it and reversing for 100+ pips. This strong reversal puts me in a buyer side of the market. I will look for Wednesday London session to fall short of breaking Tuesday's low and continue its bullish trend towards May 2018 high. I'm looking for the market to retrace to 1.3930-1.3900 during London session open. I will wait to market execute the trade because on the 1hr and less we are making lower lows so I need to see signs of reversal before taking the trade. I don't want to see todays low taken out but there is a high chance for it so I will be playing it safe. The safest route is to wait for NY session open and see if London session takes out yesterday's high and begins to retrace open of NY session. so there is a possibility to get 2 entries if GU plays out perfectly. If It plays out as so I will look to hold these trades until NFP on Friday.