GBPUSD: Bearish Momentum Can Lead To Test Of 1.3300 Area?

GBPUSD update: After a significant decline, price has settled around the 1.3551 level which is a reversal zone boundary. The type of price formation that is present would usually call for a long, BUT usually this is followed by a short squeeze which is not happening here. And for this reason, I am anticipating a bearish continuation pattern.

The EUR and AUD had decent bullish retraces that may lead to a quality signal, but not this pair. When price reaches a reversal zone boundary, and produces a double bottom type formation, typically the next move is a squeeze. So when the market does not squeeze, that is telling us something. It is telling us that the bearish momentum is still firmly in control.

There is an inside bar/bearish pin bar with a low of 1.3502. This can act as an aggressive short trigger for those who are monitoring shorter time frames. It is aggressive because the trigger is occurring at a low, rather than a lower high. This is the nature of trend continuation patterns and this one can lead price into the next support near the 1.3300 area.

If this market can gather the strength for a bullish retrace, the resistance level to watch for is the 1.3821 area (.382 of recent bearish swing). This would serve as the more conservative area to look for a swing trade short as well.

Keep in mind, the long term wave count for this market is bearish which lends more potential to the short side. Aggressive break out trades such as the break of the 1.3502 low are within reason in such a context. Just make sure your plan is very well defined. This means you should know before you enter what type of trade it is: day trade? swing trade? And you should know your stop and your targets as well.

I will be covering the broader time horizons on S.C. so make sure to keep an eye out.