Nick Nasad
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GBP/USD - Will Bearish Momentum in the Pair Continue? Looking For Places to Sell

Today's action in the GBP/USD adds evidence to the bearish case in this pair as it fell through two recent levels of support at 1.5560 and 1.5540. The pair reached as low as 1.5480, before being able to stage a retracement.

Couple of things to notice from the chart above:
  1. We have established a downward sloping channel for the time being (the thick black trendlines.)
  2. I have another set of downward sloping parallel lines that can become useful (the thin black trendlines).
  3. The old level of support at 1.5560 may now turn to resistance. This would be a good bearish signal, and a place to place a short entry.
  4. The 21/55 EMA picture is showing some bearish momentum (the 21-EMA, in red, is below the 55-EMA, in blue, and the distance between the two has begun to widen out).
  5. Price has remained below the 200-EMA (in gray) and it can act as resistance during throwbacks.
  6. These levels/tools/areas would also be used for stop placement, depending on where the entry is and how many pips you are willing to risk.
My BIAS: The market direction over the past 4 sessions has been down, and I believe its more likely that we continue this downward move (which in the 4-hour is a counter-trend action).

Some Possible Entry Levels: With that bias on the market (GBP/USD bearish) and the technical lines and tools I described above as my road-map, I see several places from which I may be tempted to short this pair including:

  • 1) the retest of old support (as resistance) at 1.5560,
  • 2) the 200-EMA and channel resistance trendline near 1.5575/80.
  • If the pair heads higher, then there's the 1.5610 area, and we would have to see how price got there, and what the conditions are.
Downside Targets: The targets for this bearish set-up would be 1.5480 (Tue. lows) and then 1.5430 (this would correspond to the lows put in during Aug 13/14, and line up with some of my parallel trendlines).

- Nick