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Few months ago, the market was pushed above the weekly key zone around 1.5550 in an attempt to reach the area of 1.5900, which provided significant bearish resistance.
Recent weekly candlesticks came as bearish engulfing candles, closing below the level of 1.5220 (the neckline of the Head and Shoulders pattern). This supported the bearish side of the market in the long term.
A quick bearish decline towards the previous weekly level at 1.4950 was expected as a result of the bearish breakdown below 1.5200.
Weekly fixation below 1.4950 exposed the way towards 1.4620 which was broken down last week as well.
Moreover, the previous weekly candlestick closed below the depicted demand level at 1.4620. Hence, a quick bearish decline towards the next demand level (1.4360) should be expected.
On the other hand, a bullish closure above 1.4610 brings bullish strength into the market. The first bullish target would be located at 1.4950.
During 2015, significant bearish rejection was expressed around 1.5770 and 1.5230 where a bearish Head and Shoulders reversal pattern was established. Since then, the market has been trending down within the depicted bearish channel.
The price level of 1.4950 was broken to the downside few weeks ago, constituting a significant supply level. As anticipated, it offered a valid sell entry on December 24.
Daily persistence below 1.4800 (the lower limit of the current bearish channel) allowed further bearish decline towards 1.4680 and 1.4610 where previous prominent bottoms are located on the GBP/USD daily chart.
The GBP/USD pair now looks oversold as it is being pushed further below the lower limit of the depicted bearish channel. Moreover, the previous demand level at 1.4615 was broken down last Friday.
That is why, early signs of bullish rejection should be considered around the demand level of 1.4360 as a valid buy signal.
Trading Recommendation:
Risky traders can have a valid BUY entry anywhere around the price level of 1.4360.
S/L should be located below 1.4300 to minimize our risk. Initial T/P levels should be located at 1.4440, 1.4500 and 1.4610.
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