ICmarkets

GBP/USD: We are expecting higher prices next week.

FX:GBPUSD   British Pound/U.S. Dollar
199 0 2
Weekly Timeframe: Very similar to the Euro             , the British pound had a bullish week. Price failed to hit the weekly demand area at 1.58533-1.60157 by about 35 pips or so before taking off like a rocket. The market closed the week at 1.62636; just a few pips above a major weekly resistance flip level at 1.62591. If this level gives way, the next key area of weekly supply (decision point) comes in at 1.66429-1.65340.

Daily timeframe: The major resistance flip level seen on the weekly timeframe at 1.62591 resembles a drop-base-rally demand area on the daily timeframe at 1.62510-1.63401; well we should now really refer to it as a daily demand flip area. Price has, in our opinion now filled the previous weekend gap (1.62317/1.62791) resulting in price closing the week out (1.62636) within the aforementioned daily demand flip area.

A break above this area could likely force prices up to the next area of interest at 1.64589-1.64949 (another daily demand flip area). Conversely, if a bearish reaction is seen here, which should really be the case considering the historical significance of this area seen on the weekly timeframe , prices could very well drop down to a dally support level at 1.58992, which is located deep within a weekly demand area at 1.58533-1.60157.

4hr Timeframe: Considering both the weekly and daily timeframes are trading around supply areas (1.62591/1.62510-1.63401) at the moment, we naturally expect lower prices this week.

However, think about this for a moment. The Euro             is currently trading very near to weekly demand at 1.26591-1.28010, and also trading out of daily demand at 1.27541-1.28676 where higher prices are expected to be seen this week.

Can anyone see the problem here? For two pairs that generally move in tandem with each other, both pairs are producing conflicting signals, meaning one has to give in! With positive bullish price action being seen on the Euro             4hr timeframe presently, and the 4hr timeframe on the British pound showing little interest around the 4hr supply area at 1.63393-1.62791, we believe higher prices will be eventually seen on the pound, forcing price back into correlation with the Euro             . Our price action confirmation buy level set just above the round number 1.62 at 1.62100 was triggered on Friday. The buyers need to prove this level is valid for buying by breaking above the aforementioned 4hr supply area, only then will we consider setting a pending buy order awaiting a possible return.

The above analysis is only ONE opinion and id definitely open to debate!

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