Well done to those short GBP - H4 supply held well!

2020年2月26日

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

Early February 2018 saw the pair reject 1.4520/1.3893, a 50.0% retracement and 38.2% Fibonacci retracement combination (red). This, along with trendline resistance (2.1161), remains a well-rounded resistance area to keep an eye on long term.

In recent months, we’ve seen a recovery form off 1.1904/1.2235, clocking highs of 1.3514 in December 2019 and breaking the 1.3380 March 2019 high. So far this month, however, we’ve seen little but red, down 2.27%.

Daily timeframe:

Partially altered outlook from previous analysis –

Demand at 1.2823/1.2910, represents the lower edge of a multi-month range (supply at 1.3303/1.3184 caps upside), continues to contain downside, while a local trendline resistance (1.3514) hovers north of price. Supply mentioned above at 1.3303/1.3184 will likely enter the mix should we push above the said trendline, whereas beyond the current demand, another port of demand, a touch larger than the current, resides at 1.2649/1.2799 which happens to house the 200-day SMA.

Meanwhile, in terms of the RSI indicator, since the beginning of the year we have been compressing within a descending channel (black lines), with the value currently holding above channel support.

H4 timeframe:

Partially altered outlook from previous analysis –

Wednesday’s analysis noted that after price retested demand 1.2868/1.2894, the pair caught a fresh bid and entered the jaws of an attractive supply drawn from 1.3023/1.3006. What was appealing was the approach formed an AB=CD pattern (orange) that terminated around 1.3013.

The analysis went on to further highlight:

It may also interest some traders to note that we likely have sellers attempting to fade the recent pullback from 1.2849, due to the 1.3070 double top formation recently confirming (breaking the 1.2872 low, the trough between the two peaks, marked with a blue arrow, offers double-top confirmation). The take-profit target (1.2672) for confirmed double-top patterns can be calculated by taking the distance between the highest peak and the trough and projecting this value south of the trough.

As can be seen from this morning’s chart, as expected, the H4 supply held ground, forcing a test at the demand area mentioned above at 1.2868/1.2894.

H1 timeframe:

Heightened hard Brexit risk remains a persistent weight for sterling as the UK and EU show faint sign of relaxing divergent trade terms. Technically, we nudged through demand at 1.2957/1.2944, and the 100-period SMA, leaving the 1.29 free, which, as you can see, is holding right now. A run lower from here could draw the market to familiar support at 1.2850, though a move north has demand-turned supply mentioned above at 1.2957/1.2944 in sight.

Direction:

The combination of daily demand at 1.2823/1.2910, along with H4 demand at 1.2868/1.2894 and the 1.29 handle entering view yesterday, could encourage a recovery move today. So any intraday long positions off 1.29 may target 1.2957/1.2944 as an initial base, with a break maybe drawing the candles back to 1.30ish.