Hey guys. After an awesome holiday period I am back in the saddle trading and what better way to kick of the new year than with some price action analysis!
Today I am going to take a look at GBP/USD. I will be sharing my support/resistance areas with you including the extreme lower lines which could be reached in the coming months.
Let’s start off with the weekly chart and then move to the lower timeframes.
GBP/USD Weekly Chart Analysis
Ok as you see the marked 500 pip area between 1.5200 and 1.5700 shows quite a bit of choppiness historically. This means that this area is going to be extremely tough to break through on the short side. Whilst it does seem that the price is trying to get through it certainly isn’t an easy road.
Based solely on support/resistance the path up (the long side) is much easier than the path down (short side). Keep in mind that the lower the price goes the more buyers it will encounter trying to push it up.
You can see my support/resistance areas marked out on this chart. These lines were placed on the hourly chart so they look very closely spaced together on this weekly chart.
GBP/USD Daily Chart Analysis
The daily chart shows much the same thing. Whilst right now it looks like the price wants to move down, as you can see from the bearish trend line, it will hit a lot of support on the way down.
As you can see on the 22nd of September the price made a significant low pushing down to the 1.5325 at which point buyers flooded the market and turned the price around. This was repeated on the 6th of October when the price hit the 1.5270 level. So even though it seems the bears are in control of the market do not count the bulls out. The lower the price goes the more likely we will see a huge influx of buyers.
The first red line I have marked on my chart from the top is the 1.5325. Since July 2010 the price has been unable to make a sustained move beyond that level. It did dip below briefly last October as mentioned above but the move was not sustained, the buyers immediately turned the price around.
GBP/USD 4hr Chart Analysis
The 4hr chart does not show us anything new. Again we can clearly see an overall bearish trend. However, we can also see the support/resistance are I have marked 1.5355-1.5375 has held the price back the last two times it was reached. Right now it has pushed slightly lower but it is still struggling with the level.
Summing Up
From the analysis it is very clear that the bears currently have a firmer control of price. However, they are approaching an area which has a lot of buyers. So I am watching closely for a significant reversal from one of the next few red S+R lines you see on my chart. I will looking for trades on the 1hr, 4hr and Daily. If the bulls do gain control of the market it should make for a very nice reversal trade.
