There are no strong indications of either an uptrend or a downtrend. But considering the double rejection of the resistance, the price could be going down. In absence of the distinguished trend. The risk/reward ratio should be higher than normal and therefore the critical price for sellers should be very close to the current resistance.
Disclaimer: The analysis presented in this article is for educational purposes only and should not be considered as financial advice.
This analysis was done on MetaTrader 4.
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Trade Idea Details:
GBP/USD symbol on the MT4 platform
Type: Bearish
Key support levels: 1.2437, 1.2335
Key resistance levels: 1.2530, 1.2560
Price Action:
On the 4-hour chart GBP/USD is producing lower lows and lower highs, thus suggesting the validity of the downtrend. We have applied the Fibonacci retracement indicator to the May 15 – June 10 uptrend. Clearly, the resistance has been formed at 1.2530, which was rejected for two times.
On the other hand, the price has rejected the 200 Exponential and Simple Moving Average and currently remains above both of them. This adds some contradictions in further price development and overall, might result in the range trading. The range could be between 1.2252 support and 1.2530 resistance levels.
All-in-all, the probability is in favor of the downside move, and while the price might not reach previous support at 1.2252, it could be heading towards the 1.2284. This support level is confirmed by two Fibonacci retracement levels, 127.2%, and 88.6%, making it a potentially strong demand zone.
Potential Trade Idea:
The 1.2510 seems like a good selling point because it provides an above-average RR ratio. The stop loss can be placed at 1.2561, alternatively, exit signal can be used, which would be a daily break and close above recent high at 1.5242. The target for taking profits could be placed near 1.2282.
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