Timing GBP/USD’s Pullback
GBP/USD is undergoing a steady pullback from its July 17th highs. Let’s explore how trend continuation traders can use technical indicators and multiple timeframes to refine their entry timing into GBP/USD’s pullback.
Daily Timeframe: Identifying a Confluent Support Zone
GBP/USD’s daily candle chart shows that the market has been in an uptrend since the April lows. The 50-day and 200-day simple moving averages (MAs) provide context, with the 50-day MA comfortably above the 200-day MA, indicating a bullish long-term trend.
In recent weeks, GBP/USD has been pulling back from the highs reached on July 17th. Several tools and indicators can help determine when this pullback might end and the uptrend resume:
1. Horizontal Support: The simplest indicators are often the most effective. The cluster of swing highs that formed resistance in early June was broken in July. This broken resistance level can now provide support when retested. We already see some evidence of this with prices bouncing from horizontal support during yesterday’s session.
2. Fibonacci Retracement: By taking Fibonacci retracements from the early-July swing low to the mid-July swing high, we find that the 50% and 61.8% retracement levels are confluent with horizontal support.
3. Anchored VWAP: Using TradingView’s anchored VWAP tool, we can anchor the volume-weighted average price (VWAP) to the early-July swing lows. This reveals the true average price for those who entered the market during the last trend leg higher.
4 .Retracement Channel Breakout: GBP/USD’s pullback has formed a clear descending channel. For the long-term uptrend to resume, a breakout above this channel is necessary. We can use a lower timeframe to set a precise channel breakout trigger (see Hourly Timeframe: Setting a Channel Breakout Trigger section below).
GBP/USD Daily Candle Chart
Past performance is not a reliable indicator of future results
Hourly Timeframe: Setting a Channel Breakout Trigger
When viewed on the hourly candle chart, the daily retracement channel appears as an established downtrend. This lower timeframe downtrend must be respected, and there are no guarantees it will reverse in favour of the higher timeframe trend. With this in mind, traders can set a precise channel breakout trigger on the hourly chart. This can be used to set price alerts for those who cannot monitor the market all day. The breakout trigger price alert can be placed above the most recent swing high and also above the anchored VWAP.
GBP/USD Hourly Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83.51% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Daily Timeframe: Identifying a Confluent Support Zone
GBP/USD’s daily candle chart shows that the market has been in an uptrend since the April lows. The 50-day and 200-day simple moving averages (MAs) provide context, with the 50-day MA comfortably above the 200-day MA, indicating a bullish long-term trend.
In recent weeks, GBP/USD has been pulling back from the highs reached on July 17th. Several tools and indicators can help determine when this pullback might end and the uptrend resume:
1. Horizontal Support: The simplest indicators are often the most effective. The cluster of swing highs that formed resistance in early June was broken in July. This broken resistance level can now provide support when retested. We already see some evidence of this with prices bouncing from horizontal support during yesterday’s session.
2. Fibonacci Retracement: By taking Fibonacci retracements from the early-July swing low to the mid-July swing high, we find that the 50% and 61.8% retracement levels are confluent with horizontal support.
3. Anchored VWAP: Using TradingView’s anchored VWAP tool, we can anchor the volume-weighted average price (VWAP) to the early-July swing lows. This reveals the true average price for those who entered the market during the last trend leg higher.
4 .Retracement Channel Breakout: GBP/USD’s pullback has formed a clear descending channel. For the long-term uptrend to resume, a breakout above this channel is necessary. We can use a lower timeframe to set a precise channel breakout trigger (see Hourly Timeframe: Setting a Channel Breakout Trigger section below).
GBP/USD Daily Candle Chart
Past performance is not a reliable indicator of future results
Hourly Timeframe: Setting a Channel Breakout Trigger
When viewed on the hourly candle chart, the daily retracement channel appears as an established downtrend. This lower timeframe downtrend must be respected, and there are no guarantees it will reverse in favour of the higher timeframe trend. With this in mind, traders can set a precise channel breakout trigger on the hourly chart. This can be used to set price alerts for those who cannot monitor the market all day. The breakout trigger price alert can be placed above the most recent swing high and also above the anchored VWAP.
GBP/USD Hourly Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83.51% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
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