Weekly
- Last Candlesticks pattern: Hammer
- Time of formation: 12 July 2011
- Trend bias: Sideways
Daily
- Last Candlesticks pattern: Shooting star
- Time of formation: 19 Aug 2011
- Trend bias: Near term up
GBP/USD – 1.5703
The British pound opened lower again this week and adding credence to our bearish view that the major decline from this year’s high of 1.6747 to retracement of medium term uptrend and indicated target at 1.5750 and 1.5650/55 (100% projection of 1.6747-1.5781 measuring from 1.6618) had been met. As price is still trading well below all Tenkan-Sen, Kijun-Sen and Ichimoku cloud, bearishness remains for further fall towards 1.5550/60, however, near term oversold condition should prevent sharp fall below 1.5488 (50% Fibonacci retracement of 1.4228-1.6747) and risk from there has increased for a corrective rebound later.
On the upside, whilst recovery back to 1.5800 cannot be ruled out, reckon 1.5858-69 (current level of the Tenkan-Sen and previous resistance) would limit upside and bring such decline to aforesaid downside targets. Only a daily close above 1.5900 would suggest a minor low is in place and risk retracement to psychological resistance at 1.6000 but reckon resistance at 1.6084 would limit upside and 1.6126-28 (current level of the Kijun-Sen and Ichimoku cloud bottom) would limit upside, bring another selloff.
Recommendation: Sell at 1.5800 for 1.5550 with stop above 1.5900
On the weekly chart, a series of windows were formed since the decline began from 1.6618 and as price has clearly traded inside the Ichimoku cloud area (indicated downside target at 1.5650/55 – 100% projection of 1.6747-1.5781 measuring from 1.6618 had been met last week), bearishness remains for further fall to 1.5550 and possibly towards 1.5488 (50% Fibonacci retracement of 1.4228-1.6747). Having said that, near term oversold condition should limit downside to previous support at 1.5345 and the Ichimoku cloud bottom (now at 1.5317) should hold from here.
On the upside, expect recovery to be limited to last week’s high of 1.5869 and bring such a decline. Only above 1.5920 would suggest a minor low is formed and risk test of the Ichimoku cloud top (now at 1.5975) and then towards resistance at 1.6084, however, upside should be limited to the Tenkan-Sen (now at 1.6126) and the Kijun-Sen (now at 1.6190) should remain intact, bring another decline later.
