Daily closure above 1.5720 (the highest level in August) enhanced further bullish pressure to be applied, so that the bulls could step above 1.5760 (the highest level in June).
The previous bullish swing targeted 100% Fibonacci Expansion level. However, the current bullish swing was strong enough to bypass this level, when the pair stepped above 1.6035 recording a daily high at 1.6262, which is 70 pips higher than 127.2% Fibonacci Expansion level. However, most of the daily gains were lost resulting in an Inverted Hammer daily candlestick during the 1st week in October.
Price fixing above 1.5950 enabled the bulls to reach 1.6035, the nearest supply level followed by the retesting of 127.2% Fibonacci Expansion around 1.6220.
Last week, on Thursday, the GBP/USD pair broke initially the 1.6200 handle touching the area as of 1.6250. However, signs of bullish failure are obvious on the chart.
The cable is establishing a bearish Head-and-Shoulders pattern with right shoulder located around 1.6200. That is why, a valid sell entry was suggested at 1.6200 or after breakdown of the neck-line around 1.6000 - 1.5950 (for conservative traders) to have an estimated target around 1.5720 with SL as daily closure above 1.6250.
The current bearish momentum needs to break down demand zone around 1.6040-1.6020 in order to pursue further bearish targets around 1.5720.
Fundamentally, Sterling Pound traded near its lowest level in two months against the euro in trading on Wednesday; reflecting concerns about growth and maintaining strong British economy during the past few months.
Failure to breakdown 1.6040-1.6000 zone was observed. Instead, a daily Pin-Bar was formed at the daily closure representing indecision of the bears. However, today bearish breakdown is taking place waiting for the 4H and daily closures as confirmation. It's important to note that bullish rejection will lead to another bullish swing towards 1.6200 again.
A breakthrough above 1.6220, which is not expected, will lead to another bullish swing towards 1.6285 again (141.4% Fibo Expansion), where intraday resistance should be applied.
