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Important: This site uses New York Close Forex Charts so that each 24-hour session starts and ends at 5 pm EST. These charts are essential for trading price action.
There have been a ton of quality opportunities lately, and GBPUSD is no exception.
The pair was signaling a break lower at the end of July.
Notice the lower highs into that 1.2380 level between July 12th and the 26th.
Anytime you see a market carving lower highs into support, you can start to anticipate a breakdown.
The same goes for a market carving higher lows into resistance as that usually precedes a break higher.
I mentioned the potential for a GBPUSD breakdown in the July 28th weekly forecast.
More specifically, I wrote that “a daily close below 1.2380 would expose the 1.2100 handle”.
That was my base case. In other words, I was anticipating the breakdown given the lower highs I just mentioned.
Fast forward to today, and you can see that GBPUSD did reach the 1.2100 support level after breaking below 1.2380.
And now that we have more price action to work with, it appears the pound is also carving a descending channel.
Note how this latest decline caught a bid at the 1.2100 horizontal level which intersects with channel support.
So where to from here?
If the recent action within this channel is any indication, the GBPUSD may continue to attract buyers above this 1.2100 support zone.
Buyers may even take the pair back to the confluence of resistance at 1.2380.
But despite the likelihood of a bounce, I don’t want to buy GBPUSD.
The trend is pointed lower here with the daily and weekly time frames still carving lower highs and lower lows.
As such, I only want to watch for selling opportunities from resistance.
We’ll have to wait and see what comes of this channel, but a retest of 1.2380 in the coming days could offer another chance to get short.
Just keep in mind that 1.2100 is a considerable support level that dates back to October 2016.
So as bearish as things look right now, it’s important to stay patient and not oversize any short positions in case 1.2100 triggers a more significant rebound.
Justin Bennett is an internationally recognized Forex trader with 10+ years of experience. He's been interviewed by Stocks & Commodities Magazine as a featured trader for the month and is mentioned weekly by Forex Factory next to publications from CNN and Bloomberg. Justin created Daily Price Action in 2014 and has since grown the monthly readership to over 100,000 Forex traders and has personally mentored more than 3,000 students.Read more...
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