Two months ago, the market was pushed above the weekly key zone around 1.5550 in an attempt to reach the area around 1.5900, which provided evident supply for the GBP/USD pair.
As anticipated, a bearish pullback was executed towards the level of 1.5550. A bearish breakout below 1.5500 took place two weeks ago.
Last week, strong bearish pressure was applied to the level of 1.5550 again. It was breached temporarily until this week's bullish recovery emerged.
Contradictory signals are coming from consecutive weekly candlesticks. This indicates lack of bearish momentum below 1.5500.
The previous weekly candlestick closure above 1.5500 hindered the further bearish decline and enhanced the bullish side of the market pushing the price initially towards 1.5770 (61.8% Fibonacci level).
On the other hand, the nearest demand level around 1.5200 will become exposed if GBP/USD bears manage to bring trading below the level of 1.5500 (low probability) again.
Previously, the price zone of 1.5800-1.5880 acted as significant supply. It offered a valid sell entry few weeks ago. All T/P levels were successfully reached.
On the other hand, the level of 1.5550, which corresponds to 50% Fibonacci level and a previous prominent top, was temporarily broken allowing further bearish decline towards 1.5350 where an ascending bottom was recently established.
Last week, strong bullish price actions were expressed. A bullish pullback towards 1.5600 took place. The level of 1.5550 was breached during last week's consolidations.
However, Thursday's candlestick came as a bearish engulfing one, which enhanced the bearish side of the market.
That is why, the level of 1.5550 constitutes a significant key level to be watched for a price action. It corresponds to a short-term uptrend line.
A quick bearish decline towards 1.5470 and 1.5370 should be expected only if the level of 1.5550 gets broken to the downside again (low probability).
On the other hand, the level of 1.5770 (61.8% Fibonacci level) is the next supply level to be watched if bullish fixation above the key level of 1.5550 persists on the daily chart.
If so, a counter-trend intraday sell entry can be offered at re-testing of the level of 1.5770.
The material has been provided by InstaForex Company – www.instaforex.com