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We start today’s commentary with the third most traded currency pair, GBPUSD. The pair has been in a fairly steep downtrend since breaking trend line support in late July. Since that time the pair has lost more than 1,000 pips.
GBPUSD now faces key resistance at the month open level of 1.5960. Similar to the year open for a market, the month open often acts as support or resistance for a given currency pair.
As such, we can watch for bearish price action around this level on a 4 hour basis. Any close above 1.6020 would negate a short setup and would turn my short-term bias from bearish to bullish.
As for downside targets, the 1.5720 area is key as this was the June 2013 high and is also the 61.8 Fibonacci retracement level from the 2013 low to the 2014 high.
Note: Expect increased volatility between 4:30am and 5:30am EST tomorrow due to heavy event risk, including the BOE inflation report at 5:30am.
Summary: Watch for bearish price action on a retest of the 1.5960 resistance level. A close above 1.6020 would negate the short setup. Key support comes in at 1.5720, giving us 230 pips to work with.
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