On Monday we looked at a way to capitalize on pound strength or weakness. The smaller 4-hour ascending channel within a larger descending one provided a way for us to go long or short depending on which structure gave way first.
While the GBPUSD is still consolidating within the smaller ascending channel, today’s price action is quite useful.
I often talk about the idea of not just watching for buy or sell signals, but monitoring a market’s movement to help confirm key levels. Today’s bounce from the 1.3875 area is a prime example.
I was fairly confident about the ascending channel on Monday, but the bid that formed earlier today at 1.3875 confirms my suspicion. It will also help with the conviction of any short entry should the pair close below channel support over the coming sessions.
Of course, there’s always a chance that the GBPUSD will close above descending channel resistance first. In which case we can begin watching for bullish price action on a retest of the level as new support.
For now, Monday’s analysis remains unchanged. But I am more confident that a close below channel support which is now closer to the 1.3900 handle, would trigger a move lower toward 1.3600.
Alternatively, a close above descending channel resistance would take us back to the current 2018 high near 1.4335. Because this is a terminal pattern, it isn’t a question of if the pair will break, but when?
I’ll be sure to provide an update when that time comes.