The forex market is at a crossroads, but GBPUSD buy-side imbalances may offer clues.
Get the details in today’s video, including a complete GBPUSD trade plan, complete with key levels, unfinished auctions, and imbalances to watch.
GBPUSD is up so far this week after reclaiming 1.3380 on Friday. I discussed that bullish reclaim in the Weekly Forex Forecast.
Friday’s reclaim opened up the 1.3500 consolidation this week. We also knew the DXY was coming off its 98.60 key resistance level.
As of Tuesday, the DXY is testing 97.70 support as GBPUSD trends sideways.
This leaves the forex market at a crossroads. If the DXY can hold 97.70 support and start to show strength, we could see pairs like GBPUSD rotate lower.
However, if the DXY breaks 97.70, it will open the door to 97.50 and 97.27.
There is also a 4-hour trend line on the DXY that intersects with the 97.70 region on Tuesday. Even a 4-hour close below this region would look bearish for the US dollar.
As for GBPUSD, that scenario could trigger a bullish move toward the 1.3540 area.
There’s no shortage of reasons for the pound to move higher, either. The recent selloff left unfinished auctions at 1.3467, 1.3528, and 1.3560.
Additionally, we have two buy-side imbalances at 1.3574 and 1.3583.
Markets often target unfinished auctions and imbalances like these. Therefore, although there’s no guarantee that GBPUSD will target these, a DXY breakdown below 97.70 would make it more likely.
The bottom line is that GBPUSD remains range-bound until proven otherwise. As long as that’s the case, trading the range makes sense.
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