A few months ago, the market was pushed above the weekly key zone around 1.5550 in an attempt to reach the area of 1.5900, which has been providing the GBP/USD pair with significant resistance.
Recent weekly candlesticks came as bearish engulfing candles, closing below the level of 1.5220 (the neckline of the Head and Shoulders pattern).
This supported the bearish side of the market in the long term.
A long-term bearish target is projected towards the level of 1.4800 for this reversal pattern.
The previous demand level at 1.5200 (the origin of a previous bullish engulfing weekly candlestick) was broken down three weeks ago. This bearish tendency was confirmed by the Shooting Star and the bearish engulfing weekly candlesticks of the previous weeks.
Hence, a quick bearish decline towards the weekly demand level at 1.4950 was expected as a result of the bearish breakdown below 1.5200.
Note that another weekly closure below 1.4950 opens the way towards 1.4800 (long-term bearish target).
The previous bearish movement found its way towards the level of 1.5200 (prominent demand level), which prevented further bearish decline.
Instead of it an evident bullish reaction was performed around 1.5200-1.5170 (resulting in bullish engulfing daily candlesticks).
That led to the previous bullish pullback towards 1.5600 (the backside of the depicted uptrend). It placed the GBP/USD pair under significant bearish pressure.
Prominent demand levels at 1.5350 and 1.5200 were broken down a few weeks ago. These levels currently constitute prominent supply to be watched for new sell entries.
The key level of 1.5200 was temporarily breached to the upside before a daily bearish engulfing candlestick was expressed around 1.5330 on November 20.
Bearish persistence below 1.5200 and then 1.5050 (previous weekly bottom) enhanced further bearish decline towards the weekly demand level of 1.4950 (also corresponding to the lower limit of the depicted channel).
For conservative traders, a valid buy entry will probably be offered around the weekly demand zone of 1.4950-1.4930.
S/L should be placed below 1.4900. Initial T/P levels should be located at 1.5170 and 1.5300.
On the other hand, risky traders can sell the GBP/USD pair at price level of 1.5220. S/L should be placed above 1.5300.
The material has been provided by InstaForex Company – www.instaforex.com