Two days ago, I wrote about a scenario that would turn GBPUSD bearish.
The 1.2960 region is the location of ascending channel support that extends from the 2019 low.
Although the GBPUSD hasn’t closed below that level yet, the pair did take out another critical level just two days ago.
Monday’s 30 pip gap down was the first sign of weakness.
On Saturday, I mentioned how a gap down this week would indicate weakness.
That Monday selloff led to a close below trend line support that extends from the November 2019 low.
I’ve pointed out this trend line several times in recent weeks.
So far today, the GBPUSD is selling off from that area, which is now serving as resistance.
But the 1.2980 horizontal level has shown resilience.
And the bottom of the 2019 channel makes 1.2960/80 a confluence of support.
However, as I mentioned in Monday’s members-only video, a breakdown seems imminent given the way this week started.
Add the fact that GBPUSD closed below the November 2019 trend line on Monday, and the breakdown may have already started.
A daily close below that 1.2960/80 region would target 1.2770.
The “daily close” refers to 5 pm EST using the same New York close Forex charts I use.
In my opinion, that would be just the start.
I think a close below channel support near 1.2960/70 would reach 1.2570, perhaps even 1.2380.
The reason I think that has to do with the way this ascending channel outlines the latest uptrend.
Since last September, we’ve seen GBPUSD carve higher lows and higher highs.
A daily close below ascending channel support near 1.2960/70 could very well trigger the first lower low in that series.
Keep in mind too that British pound weakness bodes well for the EURGBP long idea I wrote about last Friday and again on Monday.
Note: I hold a GBPUSD short position from 1.3044.
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