GBP/USD is trading in the green today and it seems determined to resume the short-term bounce. The pair has decreased as much as 1.2725 level, but it has found strong demand and now has turned to the upside.
The pair is trapped within a downward channel, so the bias remains bearish despite the minor rebound. GBP/USD is trading at 1.2874, a larger upside movement could be confirmed somewhere above 1.3025 level.
- GBP/USD Trapped Within A Downward channel
GBP/USD has decreased after the breakdown below the uptrend was confirmed. It has also closed below the 1.2900 psychological level, technically, it was expected to drop deeper. Maybe, this rebound will be only temporary, GBP/USD could retest the 1.2975 - 1.2904 resistance area (support turned into resistance) before it resumes the downside movement.
The pair was rejected by the 50% retracement level, the false breakdown was followed by a bullish engulfing, that's why we could have an important bullish movement. The bullish engulfing was confirmed by yesterday's bullish candle. I've said that the price is trading within a downward channel, you can see on the Daily chart that GBP/USD is trapped between the inside sliding lines (sl, sl1) of the descending pitchfork.
The price has failed to reach the second sliding line (sl1), signaling an oversold and a potential bullish momentum. We'll see how long this rebound will be because GBP/USD is still under some bearish pressure as long as is traded below the 1.2975 - 1.2904 area, below the 38.2% level and below the first sliding parallel line (sl) of the descending pitchfork.
- TRADING RECOMMENDATIONS
We had a buying opportunity on H1 chart with potential targets at the mentioned near-term resistance levels. According to the Daily chart, it is risky to buy the pair only after the bullish engulfing pattern. Technically, GBP/USD was expected to drop way deeper after the valid breakdown through the uptrend line.
GBP/USD could drop anytime as long it is trading below the sliding line (sl1), below the 38.2% retracement level. That's why it is not recommended to buy it at this moment. You could search for short positions around the 38.2% level, near 1.2904 area, or higher at the sliding line (sl) if the price fails to reach it or if it registers a false breakout.
A larger upside movement could be confirmed only if the price breaks out from this downward channel and if it stabilizes somewhere above the 23.6% retracement level. The major downside target remains at the median line (ML) of the descending pitchfork, GBP/USD could drop towards this dynamic resistance if it is rejected by the near-term obstacles.
