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GBPUSD Sells Off From New Resistance

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Last Thursday I wrote a post about the end of the GBPUSD relief rally.

At the time, the pound was still trading above key trend line support.

However, the way sellers pressured the level throughout March was an early indication that it may not hold much longer.

That and the fact that buyers were going nowhere fast.

Sure enough, the March 28th session closed well below our trend line.

The GBPUSD then retested former trend line support as new resistance during last Friday’s session.

And for those who missed Friday’s retest, the pair tagged our trend line for a second time just yesterday.

As you can see, there have been plenty of opportunities to short GBPUSD from the 1.3130/40 resistance area.

So where to from here?

Well, as I mentioned last week, the 1.2920 area is one to watch.

But there are bound to be other support areas that will attract a few bids on the way down.

One of those is 1.3010.

You can see how this level has helped prop up GBPUSD since February 20th.

The 1.3010 area is also the 38.2% Fibonacci of the year-to-date range.

As such, it’s going to be essential to see sellers close GBPUSD below 1.3010 on a daily closing basis.

Until then, we will continue to see bids crop up in the region.

The challenge with shorting GBPUSD (apart from Brexit) is the fact that the market has been moving sideways for nearly a year.

That wouldn’t be a problem if it weren’t for the plethora of horizontal levels created by that sideways movement.

For those who got in near the new resistance area at 1.3130/40, you’re in good shape at the moment.

However, finding new opportunities on the way down may be challenging.

But as for the immediate path forward, GBPUSD bears need to clear 1.3010 on a daily closing basis to expose 1.2920 and perhaps 1.2800.

I will remain bearish GBPUSD as long as the pair remains below the 1.3200 area.

IMPORTANT: I use New York close charts so that each day closes at 5 pm EST.

Click Here to get access to the same charts I use.

GBPUSD selloff from new resistance area

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16 comments
Justin Bennett says

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Reply
    Orlin Kovatchev says

    Thanks for your analysis Justin. I like many of your ideas. In this particular case however, I think we’d rather use a trend line connecting 12.12.2018 and 14.02.2019 lows and ignore the flash crash on 03.02.2019 as a starting point, due to the low liquidity that day. The suggested by me trend line still serves as a perfect support during last few weeks, creating a confluence of support with the horizontal line around 1.30. A little bit lower, currently at 1.2976 is the 200 day SMA which by many traders is considered a major trend support. I believe this area of support can be broken only if there is a hard Brexit within the next 10 days. Otherwise we might see a good appreciation of the GBP across all its crosses.

    Reply
      Orlin Kovatchev says

      Sorry for the mistake. I meant 03.01.2019, not 03.02.2019

      Reply
      Justin Bennett says

      You’re welcome. There is often more than one level in play, even with trend lines.

      But I stand by my analysis and placement of the trend line from the year-to-date low. It’s difficult to argue otherwise when you consider the Friday and Monday highs as I mentioned in the post above.

      Furthermore, the fact that the level starts from a year-to-date low is significant in and of itself.

      Reply
      Namzee Brown says

      Wow. Just exactly as I analysed Orlin, I thought I was the only one here. I am bullish on this one for now. Since the pair have been respecting the 200 SMA it is more likely to retest at the current area. But since we have an upcoming Unemployment Rate & Non-Farm Employment Change news this Friday we expect anything to happen. For now, Proceed with caution.

      Reply
        Orlin Kovatchev says

        I am not sure the Non Farm Employment Change would influence too much GBP-USD. It sure would do that to the other USD crosses. The main drivers for GBP are the Brexit news. Those are fundamental drivers, not that much technicals. The chances for a hard Brexit are lower than 25% as most of the politicians from both sides of the Chanel do not want it. That is why the picture looks positive for GBP-USD. It stays above 200 day SMA and 61.8% of the current year range since the middle of February. Justin is right that year to date lows and highs are usually very important levels. This year low however happened in a flash crash during the first 15 minutes of the 03.01.2019 trading day due to speculations exploiting extremely low volatility. That is why I do not trust that level. I am long GBP-USD from 1.3040, targeting 1.3290 and 1.3580 and a stop loss 1.2960. We will see what happens within next 7-8 days.

        Reply
Elham says

Hello Mr. Justin,
I’m so glad to find you and thank you for the news and lessons.
Would you please let me know what will happen to EURUSD? I have buy position on it and it’s making me so upset 🙁 dont know what to do…

Thanks and regards

Elham

Reply
    Justin Bennett says

    I don’t know what will happen in any market; nobody does.

    A position should never make you “so upset”. If it does, then you’re either risking too much or didn’t plan the trade beforehand…or both.

    Reply
Ross says

Hi Justin , great analysis thanks , what are your thoughts on Gbp / Aud now after price pushed up well through the area of of this (new) resistance area 1.8430 and 1.8470.

Reply
    Justin Bennett says

    Same as always: that the market will try to hold above it now.

    Reply
Hamid khan says

Dear Justin, yours daily price action setup is often wrong.For example you said that Gbpaud resistance is 1.8470 but gbpaud is trading above yours daily price action risistance .I have lost my account

Reply
    Justin Bennett says

    Support and resistance levels are broken all the time. No trader is perfect, especially in the conditions we’ve seen so far this year.

    And “you” lost your account. Not me. If you’re simply following what someone else says, it tells me that you don’t understand the very basics of what it means to be a trader and thus should not be trading.

    Create a clear plan of action for what, when, and where you trade as well as how much you risk. If you don’t have that, you have no place in the market.

    Reply
      Hamid khan says

      Thank you Sir, I learn from you every step of my trading.I respect to you forever.I am wrong and you are always right Sir God bless you

      Reply
Antanas says

I never bealeved gbp/usd will go down i long now .

Reply
kingsley says

For sometime now I have been following your comments and must say that Its almost always accurate and precise, I love that. Keep it up Justin.

Reply
    Justin Bennett says

    Cheers. Thanks for the support.

    Reply
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