Technical analysis as at 29/9/2019
The GBPUSD currency pair bounced down from the resistance level, which lies in the range of around 1.250-1.2570, in the past week, quite convincingly, when a strong bear candle was formed, as can be seen on the chart in Figure 1. Last week the price closed at 1.2289.
Figure 1: GBPUSD on weekly chart
On the daily chart, see Figure 2, we can see that after the price bounced up from double bottom, the price continued to rise until September 19, 2019, when the price exceeded the SMA 100 and created a high that is higher than the high from the period 8/26- 8/29/2019. After that, however, further growth was rejected and the price gradually fell to the level of the first support last week.
The first higher high may indicate that the trend reversal of the downtrend is approaching. To confirm this, it is now necessary to create a higher low. We do not have this yet, so from the perspective of Dow trend theory we are now in the gray zone. Conversely, from Figure 2, we can see that the faster EMA 50 (red) is still below SMA 100 (green), indicating a continued downtrend. The last three day candles are also bearish.
Figure 2: GBPUSD on daily chart
The price is now at the level of support and to confirm speculation for the long side, we would like to see a growing candle on the daily chart, for example in the form of bullish engulfing.
We plotted the Fibonacci level between the last significant low of 3/9/2019 and the last high of 20/9. On Fibonacci levels 61.8 (price level 1.22) and at 78.6 (price level 1.21), reactions often occur. It is therefore possible to wait until the price reaches these levels and enter the long trades as soon as the bull candle is formed as confirmation.
We have also drawn a potential growing channel into the chart. This is not confirmed yet, because we lack a higher low, so from this perspective it is only a hypothesis. The channel was created by joining the upper lines of the last two highs and on the lower side of the channel there is a parallel line determined by the starting point of 3/9/2019. There is some space left to the lower line of our hypothetical channel to the above-mentioned level 1.22 at Fibonacci level 61.8.
If resistance on the moving average of SMA100 is significantly exceeded, there will be space for further strengthening. Otherwise, if a significant level of support breaks at a level around 1.20, another strong decline could occur.
is on the level around 1.250- 1.2570.
is on the level around 1.2750 – 1.2850. There is a confluence here with Fibonacci level 61.8 and a resistance that developed on 17.5.2019 by breaking of previous support, see figure 1.
is in the zone 1.2280-1.2330.
lies in the area 1.20 – 1.2050.
Should the United Kingdom agree with the EU on the revised Brexit Agreement, this currency pair could be expected to continue to strengthen sharply.