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 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 , 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 , 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 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 zone will produce a decent-sized bounce given its merging structures!
Our suggestions: Our team is very confident in the H4 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 at 1.2777. In that the bounce could be short lived here, we have opted for the more aggressive stop loss in this case.