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GBPUSD Days Away From Potentially Explosive Breakout

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GBPUSD continues to coil for what could be an aggressive breakout.

The consolidation pattern you see in the chart below has formed a wedge. I mentioned this narrowing price action on Monday.

Usually, the longer a market takes to break from a terminal pattern such as this, the more explosive the breakout is likely to be.

A terminal pattern is one that must conclude relatively soon such as a wedge.

You can see where our trend line resistance came into play yesterday. Today’s session is also having trouble in that 1.2785 area.

The 4-hour chart shows it best.

GBPUSD 4-hour wedge pattern

But remember what I wrote on Monday.

Although I’m showing this wedge on a 4-hour time frame, it’s going to take a daily close below or above support or resistance respectively.

By “daily close” I’m referring to the New York 5 pm EST close. You can go here to get access to these charts which are essential for trading price action.

Why am I requiring a daily close beyond one of these levels?

My reasoning is two-fold.

First is the fact that 1.2700 has been range support since mid-August. A level that significant often requires a daily close beyond it to confirm the breakout.

The second reason has to do with pound volatility. The constant flow of Brexit news—most of which is unscheduled—has the potential to disrupt the technicals.

By waiting for the day to close beyond this wedge, I can remove much of the “noise” that often leads to false breaks.

Just ask anyone who didn’t use this rule earlier today when the 4-hour chart closed below 1.2700.

Hours later, GBPUSD was higher by more than 100 pips.

So you see, this level is not being respected on a 4-hour closing basis. It’s going to take a 5 pm EST close below it to get the job done.

The same goes for trend line resistance.

It’s still a waiting game for now. But so far, the technicals are playing out exactly as I expected they might.

And both sides are evenly matched at the moment.

However, the terminal nature of this pattern will force GBPUSD out of its comfort zone within days.

A daily close above trend line resistance would expose 1.2880 followed by 1.3070.

It may even be enough to resume this 560-pip range and re-expose the 1.3260 resistance area

Alternatively, a daily close below 1.2700 would target 1.2570 followed by 1.2410.

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GBPUSD support and resistance on the daily chart

Leave a Comment:

34 comments
Sumantra kumar halder says

Your analysis is very good working

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    Justin Bennett says

    So far so good.

    Reply
    Silwamba Ishmael says

    I get much help by your analysis Justin plse keep us posted I appreciate.

    Reply
      Justin Bennett says

      Great to hear, Silwamba! Thanks for commenting.

      Reply
Roy says

Excellent. On the watchlist

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Valkan says

I took it on a 4Hour close and it wasn’t funny

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    Justin Bennett says

    Yeah, this one requires a break on the daily chart in my opinion. That 4-hour false break may even suggest an eventual topside break, but the daily close is still key.

    Reply
Ken says

If it breaks 1.27 on a daily close. Do you expect it to then retest that level?

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    Justin Bennett says

    That depends on how it breaks.

    Reply
DAVID IFEAJIKA says

Great Job on the Watch.

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Margeir Margeirsson says

I have not been here long, but I have learned quite a bit.

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    Justin Bennett says

    Nice to hear. 🙂 Thanks for sharing.

    Reply
Uzoma Nnamdi says

thanks sir. bitcoin did the same before breaking below

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    Justin Bennett says

    You’re welcome.

    Reply
Khurram says

Thanks, what is your view on NZDUSD?

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    Justin Bennett says

    No opinion at the moment.

    Reply
Adeniyi says

Thank you Mr Bennett This is a good info and I like it. I will keep waiting until it break. Keep on updating

Reply
    Justin Bennett says

    You’re welcome.

    Reply
Rabani says

Very Nice and thanks for advice.

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    Justin Bennett says

    Anytime, Rabani. You’re welcome.

    Reply
Eljiah says

Good analysis keep it up

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    Justin Bennett says

    Thanks! Will do.

    Reply
POLA P says

patience is the challenge …thanks so much

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    Justin Bennett says

    You’re welcome. It can be challenging but gets much easier with practice.

    Reply
Diogo says

Hey thanks for the analysis. I am currently thinking about going long on this pair and close the trade is we have a daily close below 1.27. Your information has been really useful 😀

Reply
    Justin Bennett says

    You’re welcome.

    Reply
Ninja Trader says

I guess and vission that it will breakout and destroy the resistance, then when everybody is in thats the time the big boys will sell and break support. Im short already on this 🙂

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Ninja Trader says

And when everybody is “IN” the resistance breakout thats the time the big boys sells. TP 1.25950 and SL at your own risk

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OGBORO preciouslife says

Nice one

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Yavar Mir says

Thanks Justin, I am also looking for a breakout either way. However, I am biased towards bullish breakout. MACD is giving is a Bullish Divergence and the today we have an inside bar again following inside bar yesterday. Would you take it as double inside breakout or look for an engulfing bar. Thanks in advance.

Reply
    Justin Bennett says

    You’re welcome.

    Reply
Antony Morgan says

monthly gives heads up

Reply
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