Few 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 has been providing evident resistance for the GBP/USD pair.
For several weeks, consecutive weekly candlesticks have been generating contradictory signals.
Previous weekly candlestick closure above 1.5500 hindered that a further bearish decline could take place and enhanced the bullish side of the market towards 1.5670 (previous weekly high) and 1.5780 (61.8% Fibonacci level).
The most recent weekly candlestick came as bearish engulfing one, closing below the level of 1.5450 (Head and Shoulders neckline).
This enhances the bearish side of the market in the long term. For the reversal pattern, an approximate projection target should be located at the level of 1.5050.
In the short term, the nearest demand level to meet the GBP/USD pair is located around 1.5200.
Recently, it constituted a prominent demand that prevented further weekly decline where the current bullish engulfing weekly candlestick was initiated.
Previously, the 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 corresponded to the 50% Fibonacci level and the previous prominent top, was temporarily broken enabling further bearish decline towards 1.5350 where an ascending bottom was established.
Prominent supply/resistance existed around the level of 1.5770 (prominent 61.8% Fibonacci level) where the right shoulder of the depicted bearish reversal pattern.
That is why a valid sell entry was suggested for retesting at 1.5770 three weeks ago. Most of its targets have been already achieved.
Moreover, the previous bearish movement found its way towards the level of 1.5200 (Prominent Demand Level) where evident bullish rejection was expressed ( two recent bullish engulfing Daily candlesticks).
If the current bullish pullback persists above the level of 1.5300, bearish rejection should be expected around the zone of 1.5450-1.5500 (recent resistance zone).
T/P levels to be projected towards 1.5200 then 1.5050. S/L should be placed above 1.5600.
The material has been provided by InstaForex Company – www.instaforex.com