The GBPUSD has reached our first target at 1.2326, giving those who entered short on last week’s retest a profit of 175 pips.
After closing below wedge support on December 15th, we were looking for a retest of the area between 1.2510 and 1.2550. It just so happens that last Friday’s high was 1.2509.
I passed on this one as I was looking for something more substantial closer to 1.2550. However, I’ve heard from several of you who caught this move for a nice profit.
So where to from here?
As mentioned over the weekend, a close below 1.2326 would expose the October lows near 1.2090. Nothing has happened since that would cause me to doubt this idea.
Of course, whether a 4-hour close below the level is sufficient is entirely up to you. The alternative would be to wait for a daily close below 1.2326 before considering an entry.
I will say that due to the upcoming holidays, it may be best to go with the more conservative daily close. The year-end liquidity drain can sometimes disrupt the technicals, leading to an increase in false breaks.
As always, the safest way of dealing with liquidity issues is to remain on the sideline.
A bounce from current levels would take us back to the resistance area that lives between 1.2510 and 1.2550. On the flip side, should sellers manage a close below 1.2326, a slide toward the 1.2090 handle would appear to be the likely outcome.
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