Analyzing the GBPUSD directional bias

Analyzing the GBPUSD directional bias

By: Darryl Frankfort | Where To Trade | On:29-09-2014 10:39
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Key Highlights

  • Cable has been falling since mid-July
  • Major Support and resistance levels
  • Retesting the 1.6235 demand and supply zone to determine medium term direction
  • GBPUSD Short term and medium term directional biases

 

Since mid-July of this year, the cable has been selling off for over a thousand pips from the highs of 1.715 to lows at the 1.605 level. On its way down the cable found support at the 1.6050 level. Since the 9th of September, the pair has retraced back to the 1.6500 figure and found resistance at 1.6523.

The major GBPUSD Supports:

  • 1.6050 the point at which there was a pause in the sell off and a retracement on 9th September
  • 1.5850 a level last touched on 12 November of 2013 just before the cable’s rally.
  • We broke through the 1.6235 level and will be retesting it in order to determine the medium term direction of the pair.

 

The major resistance levels:

  • We are near the 1.6235 level and at London’s open; the pair was trading below this level. This makes this level technically resistance although because of its proximity and the fact that it has only been recently breached and has not been properly retested, this zone is ripe for whipsaw moves.
  • The next major resistance is at 1.6450, during its very bearish move on 3rd of this month, the pair met strong buying pressure at this level causing it to retrace for 50pips up before the bears finally had their way.  Another quite significant but not as established level is 70pips above at 1.6532, this is where we found resistance on the 19th of this month.
  • There is also a significant resistance at the 1.662 level.

The major resistance GBPUSD

Technical Analysis with the Ichimoku

 In order to determine the technical directional bias of the pair on the weekly chart and the daily charts, we will use the ichimoku for our analysis.

weekly chart GBPUSD

On the weekly chart the pair has drawn an up komu cloud. An up Komu cloud is a bullish signal for the pair. However the candles are engulfed within the cloud; for a clear bullish Signal the candles ought to have been above the cloud.

 Also the Tenkan-sen and Kijun-sen have a bearish cross with the Tenkan-sen below the kijun-sen.  On the weekly chart the pair is giving a mixed long term directional bias that may be slightly bearish on the medium term.

Daily chart GBPUSD

On the daily chart, the pair is trading below a large down Komu cloud. This is a very bearish signal. The Tenkan-sen and the Kijun-sen cross however is a bullish cross.  This implies that there is a bearish medium term bias with a potentially bullish short term bias.

Wrap up

From the technical analysis, we have no clear long term bias for the cable we will thus have to wait for further confirmation. The medium term, bearish bias for the GBPUSD on the daily chart gives further confirmation to our assessment on the weekly chart which also had a bearish cross between the Tenkan-sen and the Kijun-sen. Our medium term bias is therefore bearish. That is we expect a significant bearish move by the close of the week.

 From the daily charts, we have a slightly bullish short term bias based on the bullish Kijun-sen and Tenkan-sen cross. This means that we anticipate that the buying pressure could be quite significant today.

Since now we already have our support and resistance levels mapped out a smart approach is to wait for the pair to retest the 1.6235 level before taking any trade. This means that that the pair has to tell us which direction it is willing to go.

For short term trades we can be looking to go long the cable. For longer term trades however the best direction based on the medium term bias will be to go short at a major support.

 

 

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