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Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.
Click here to get access to the same charts I use.
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Yesterday I pointed out a confluence of resistance at 1.3300/20 on the GBPUSD. It’s the intersection of a key horizontal level and descending channel resistance from the May highs.
It didn’t take long for sellers to make their stand. We’re less than 24 hours into the new trading week, and already the pound has slipped by more than 100 pips from today’s session high.
However, despite the selloff from the 1.3300/20 area, the GBPUSD remains a somewhat tricky pair to trade.
The reason for that is due to the descending channel (which I refer to as a downward sloping flag). A descending formation such as this after a strong downtrend can often signal a correction higher.
So, while it is true that the GBPUSD is selling off from a resistance level we were aware of per yesterday’s forecast, the price action since May is tilted in favor of buyers.
With that in mind, I’ll continue to remain on the sideline for now. There is a short-term trend line from the June 28 low that if broken could present a short opportunity. Such a break could send the pair back to the 1.3050 support level.
As I mentioned on Sunday, it’s going to take a daily close (Remember, I use New York close charts which you can get here) above the 1.3300/20 area to trigger a meaningful correction. Until that time, the GBPUSD will remain vulnerable.
Update: If today’s session closes near current levels (1.3200), the bearish engulfing pattern will likely attract additional selling pressure throughout the week.
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