Daily Timeframe: Yesterday was clearly a good day for anyone long sterling, as price closed above the aforementioned weekly swap level, and has (at the time of writing) almost hit a neighboring daily swap level seen above at 1.5433.
4hr Timeframe: The 4hr timeframe shows that the recent buying originated from a small 4hr demand area seen at 1.5195-1.5227. Price rallied strongly from here breaking above both the 1.5300 level and the converging downtrend line extended from the high 1.5681. This move consequently forced the market to test 1.5400. In the event that price breaks above 1.5400, entering long may not be the best path to take considering that the daily swap level at 1.5433 is looming just above. A far more conservative approach to buying would (in our opinion) be to wait for price to break above and retest this daily level.
Selling on the other hand between 1.5400 and 1.5433 (green box) is something that has caught our team’s eye. However, we have no intention of selling at market here, owing to the fact that price has just strongly broken above a major weekly swap level (see above). Therefore, we have decided to patiently watch how price action unfolds on the lower timeframes around this green zone, if a confirmation sell signal is seen, we’ll then look to get short and ride the probable wave down to at least Friday’s high at 1.5351.
Current buy/sell orders:
• Buy orders: Flat (Predicative stop-loss orders are seen at: N/A).
• Sell orders: currently watching for lower timeframe confirmation between 1.5400 and 1.5433 (Predicative stop-loss orders are seen at: dependent on where one confirms this level).
The team at ICmarkets are going to be shortly releasing a 3-part series of how our analysts view the markets, please do look out for them.
In short though, we look for opposing demand (in this case) to be consumed/broken, then we look to trade the retest at the next obvious supply. Hope this helps.