GBPUSD has been in a strong uptrend for the whole of June right from the start of the month. On hindsight the previous downtrend had retracements back and forth towards key fibonacci levels. Not that we could have traded them, because the fibonacci levels within a trend could be seen only after the trend is completed. But it helps to note that we have identified the start and end points of the main downtrend correctly.
The downtrend had been stopped and turned sharply to the upside in April and still continuing, though we had another sharp retracement to the uptrend from mid May towards end of May.
Major retracement at the latter half of May completed as a perfect 50% at the price 1.5191. Regarding that as the “C” point I am looking at an ABCD completion way above the current price, around the last 12 month high. However, let’s not get too much ahead of ourselves. There are plenty of resistance in between and other possible harmonic patterns that could play out too.
There is another key image flashing out in the chart. Yep, the slanted head and shoulders. When I said other harmonic patterns however, I did not mean the head and shoulders (pun intended!.)
The price now is at the necklines and showing a slight hesitation to break above to the upside. With the bullish momentum that there is, if price however closes above the 1.5930 level, then I might consider entering the market with some bullish confirmation in the lower time frames.
If price breaks above the neckline and long positions are in place the 1st take profit target would be within the resistance area marked in blue, which falls between 1.6104 and 1.6158. Confluence of so many factors make it a significant turning point. Confluence such as
- 78.6% fib retracement level off the overall main downtrend (XA)
- 127.2% fib extension level of the first major retracement (AB)
So there is a possibility that price reverses in this zone making it the D point for an overall Gartley pattern completion.
Nevertheless, all these possibilities are IF price breaks above the neckline and continues to show bullish momentum.
Having said that, at the time of writing this post, the day (22nd) has been completed with a strong bear candle. My expectation is still towards the upside and will watch price closely this week, as its at a crucial confluence zone. Remember price can do whatever it wants, we are just measuring probabilities of price moving in a certain direction for a certain distance. Hence, it could free-fall from a cliff as well, right from the current price.
So trade safely. Protect your positions and capital, always.