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GBPUSD buyers pushed prices higher yesterday following last week’s 130 pip gain. The 1.3587 close puts the pound above the former resistance level at 1.3545.
I mentioned this level over the weekend. The idea was to wait for either a pullback into 1.3445 support or a daily close above 1.3545 resistance.
With the break above 1.3545 behind us, traders can begin watching for buying opportunities on a retest of the area as new support.
Although I don’t trade or teach it, the price action since late September does resemble a cup and handle formation. It’s a bullish continuation pattern that occurs within an established uptrend, which is undoubtedly the case here.
The dip between September 20 and November 30 is the cup, and the consolidation in December is the handle. My only reservation is that the start of the handle (1.3545) is lower than the beginning of the cup (1.3650).
If it is a cup and handle pattern, Tuesday’s close confirmed the setup. That places a 500 pip target above 1.3545 or somewhere near 1.4000, which served as support in April and June of 2016.
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A more immediate concern, however, is the 1.3650 resistance area. As the 2017 high, I would be surprised to see the GBPUSD break it without sellers putting up a good fight.
A daily close (New York 5 pm EST) above 1.3650 would expose the February 2016 low at 1.3835. Alternatively, a close back below 1.3545 would negate the bullish bias and re-expose the 1.3445 support area.