I’ve commented on the 560-pip range on GBPUSD a few times in recent weeks.
The latest came in Sunday’s forecast. I pointed out that, although range support at 1.2700 is intact, the lower highs of late could spell trouble for buyers.
Notice how GBPUSD bulls failed to retest the range ceiling in early November. Even the mid-October retest of 1.3260 was lower than the September high.
These could be signs that 1.2700 support is about to break.
At the same time, as long as the level holds on a daily closing basis, the GBPUSD range is intact.
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In other words, there is no short opportunity while the daily chart is above 1.2700.
But I do want to point out the potential of a breakdown nonetheless. That way we’ll be prepared in the event sellers get the job done over the coming sessions.
When dealing with a range such as this, the final target of the breakout is often equal distance to the range itself.
In the case of GBPUSD, the range has a height of 560 pips. If we then measure 560 pips below 1.2700 support, we come up with a target of 1.2140.
What’s the significance of 1.2140?
A glance at the weekly chart quickly shows how the area attracted bids in late 2016 and early 2017.
That could be a clue or a mere coincidence.
In my experience, a confluence like the one above can serve as a clue about a market’s likely future direction.
Even if it is coincidental, I don’t think anyone can dispute that a close below 1.2700 would be a significant development for bears.
So, while the final resting place is questionable, we do know that 1.2700 is a must-hold level for buyers.
If they fail to hang on this time around, GBPUSD will likely continue to slide lower.
There are three support levels I’d keep an eye on below 1.2700.
Those include 1.2570, 1.2410 and 1.2300. Each of these could attract buyers if tested over the coming weeks.
Of course, the alternative would be a bounce from range support at 1.2700.
A bullish pin bar from this area would indicate that buyers aren’t ready to fold just yet. It would also expose 1.2880 resistance and perhaps 1.3070.