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GBP/USD Rapidly Approaching Major Retracement Zone

By:
James Hyerczyk
Published: May 31, 2016, 02:43 UTC

The GBP/USD finished higher last week at 1.4616, up 0.0119 or 0.82%, and with enough upside momentum to put it in a position to challenge the last swing

GBP/USD Rapidly Approaching Major Retracement Zone

The GBP/USD finished higher last week at 1.4616, up 0.0119 or 0.82%, and with enough upside momentum to put it in a position to challenge the last swing top at 1.4769.

The main trend is up according to the weekly swing chart. A trade through 1.4769 will reaffirm the uptrend. A move through 1.4332 will turn the main trend to down.

Weekly GBP/USD

The main range is formed by the 1.5817 main top from the week-ending August 28, 2015 and the 1.3835 main bottom from the week-ending March 4, 2016. Its retracement zone is 1.4826 to 1.5060 is the primary upside target. A long-term downtrending angle passes through this zone at 1.5017, making it a valid target also.

Based on Friday’s close at 1.4616, the first upside target this week is last week’s high at 1.4739. This is followed closely by the closing price reversal top at 1.4769 and the major 50% level at 1.4826.

We could see selling on the first test of 1.4826, but this level is also the trigger point for an acceleration to the upside. If the buying is strong enough, we could see the rally extend into the downtrending angle at 1.5017 and the major Fibonacci level at 1.5060.

The first short-term support angle comes in at 1.4492. The next at 1.4412. The major uptrending angle that has been controlling the direction of the market since the week-ending March 4 comes in at 1.3835.

The GBP/USD is a news driven market at this time. Two weeks ago the market appeared to be headed lower, but a change in the polls regarding whether to stay in the European Union or leave, shifted the momentum to the upside. In order to sustain the rally, the polls will have to keep showing that the majority of Brits want to remain a member of the EU. Any change to the contrary will give long investors an excuse to book profits and send the market back down.

The market is likely to get quite volatile inside the 1.4826 to 1.5060 retracement zone since this zone is the balance point between the bulls and the bears. With the referendum to decide whether to leave or remain coming up on June 23, we’re likely to see a choppy, two-sided trade inside the retracement zone.

A rejection 1.4826 will signal that sellers are coming in to stop the rally. Overtaking this level will indicate the buying is getting stronger, but don’t expect a bull market to begin unless the Fibonacci level at 1.5060 is taken out with conviction.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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