ICmarkets
Long

Interesting PA being seen on the pound... Pending set at 1.2940

FX:GBPUSD   British Pound/U.S. Dollar
152 0 5
Weekly gain/loss: - 64 pips
Weekly closing price: 1.3108
Weekly opening price: 1.3144

Weekly view: In comparison to the last few weeks, the pair ranged a mediocre 250 pips last week, consequently forming what most candle enthusiasts would label an ‘inside candle formation’. Directly above current price, there’s a weekly resistance area at 1.3501-1.3804, while to the downside we see little support to the left of current price until the market reaches the 1.20 region (we had revisit 1986 to find this).

Daily view: The story on the daily chart , however, shows that candle action is currently capped between a daily supply drawn from 1.3533-1.3426 and a daily demand barrier coming in at 1.2789-1.2928. The supply, as you can probably see, is glued to the underside of the above said weekly resistance area, while the demand has little connection to the left of price as far as we can tell.

H4 view: Analyzing Friday’s sessions on the H4 chart shows that the bid-side of this market came under serious pressure going into London trading, following a lower than expected flash services PMI. As a result of this, the 1.32 handle was engulfed and price went on to cross swords with a H4 demand base carved from 1.3064-1.3109. Despite sterling opening on a strong footing this morning from here (36-pip gap), the most we expect from this barrier is the 1.32 hurdle.

The area that really catches our eye, nevertheless, is the 1.2868/1.2929 region (green) which is effectively a H4 harmonic Gartley reversal zone. Reinforcing this area, we see there is a 1.29 handle, a H4 Quasimodo support line at 1.2864 and the aforementioned daily demand base. Although there is a strong possibility that the GBP is heading much lower (see the weekly section), we feel that this H4 harmonic zone will produce a decent-sized bounce given its merging structures!

Our suggestions: Our team is very confident in the H4 harmonic zone mentioned above, so a pending buy order has been placed at 1.2940. Now, in regard to stops we see two possibilities here: an aggressive stop below the H4 Quasimodo low marked with a black arrow at 1.2847 or the more conventional stop below the X point of the H4 harmonic pattern at 1.2777. In that the bounce could be short lived here, we have opted for the more aggressive stop loss in this case.
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