GBP/USD Showing Multiple Signs of a Potential Long-Term Trend Reversal

GBP/USD Showing Multiple Signs of a Potential Long-Term Trend Reversal

Published: August 5th, 2020

Weekly chart

GBP/USD Weekly Technical Analysis 5 Aug 2020

On the Weekly GBP/USD chart, the trend remains bearish because of continuous lower lows and lower highs pattern. Price has found the bottom at 1.1409 back on the March 20 and since then recovered by 15.54%, which equals to the 1773 pips. Right now the price has reached an extremely strong resistance area near 1.3300 formed during the past 100 weeks.

But what is even more important is that GBP/USD today has tested 23.6% Fibonacci resistance level applied to the last corrective wave up. The resistance has been rejected cleanly along with the 200 Exponential Moving Average. This provides an extremely strong long-term resistance for GBP/USD which might result in the continuation of the downtrend. Currently, it will be important to watch the Weekly close to make sure that price will close below 1.3170 resistance. If this will occur, GBP/USD selling pressure can increase substantially during the next week. Although if the weekly close will be above the 1.3170, pair is most likely to continue trending up to test the resistance area near 1.3300.

Daily chart

GBP/USD Daily Technical Analysis 5 Aug 2020

On the daily chart, today’s price has cleanly bounced off the 23.6% Fibs at 1.3162, which could now might become a key level in this timeframe. GBP/USD is likely to attempt to break above Fibonacci resistance although only Daily break and close above might be the very first sign that the price will move towards 1.3300 resistance area.

However, as long as daily close remains below 1.3162, there is a strong probability that the trend reversal will slowly take place. There are multiple support levels where price might decline, all of which are based on the Fibonacci retracement indicator as per the weekly chart.

The nearest support is at 38.2% Fibs corresponding to the simple uptrend trendline and is located at 1.2944. A daily break below this level can result in a further price drop, where GBP/USD should test previously formed supply/demand zone at 1.2768 confirmed by 50% Fibs. And final two support levels are 78.6% Fibs at 1.2342, and 88.6% Fibs at 1.2192 which corresponds to the downtrend trendline that might act as the support as well.

6-Hour chart

GBP/USD 6-Hour Technical Analysis 5 Aug 2020

Price has tested and rejected the top of the extended ascending channel. This means that price might be at the top or very close to it. There could be several attempts to go higher along with the upper trendline of the channel, before/if the price will start moving down. Therefore some consolidation and spikes above the high are very likely in the next couple of days.

3-Hour chart

GBP/USD 3-Hour Technical Analysis 5 Aug 2020

Fibonacci retracement indicator was applied to the corrective wave up after price broke above the 1.2669 resistance on July 21. On July 31, the 427.2% Fibs resistance was rejected after which price broke below the uptrend trendline. Although correction up followed, and currently GBP/USD is attempting to produce a double top near the previously made high at 1.3170. The uptrend trendline is now acting as the resistance making it a strong supply zone as long as daily close remains below 1.3170. But the same trendline might continue being the resistance if GBP/USD breaks to the upside. In this scenario, the price can test 1.3296.

1-Hour chart

GBP/USD 1-Hour Technical Analysis 5 Aug 2020

GBP/USD broke below the ascending channel, the lower trendline of which is now being a resistance. Simultaneously, the price has rejected 88.6% Fibonacci retracement level and could be starting to move towards the 1.2944 support in the nearest future. Based on the support trendline and the Fibonacci level crossing, 1.2944 level could be reached as soon as 10-11 August.

Summary

GBP/USD has approached a strong resistance area which might result in the long term downtrend continuation starting next week. However, there could be an attempt to move towards the 1.3300 resistance area before/if the downtrend will continue.

Downside targets

As per the weekly chart, there are 5 support levels in total, all of which are based on Fibonacci retracement levels. Although the main support level could be 50% Fibs located at 1.2768, which goes in line with a strong supply/demand zone.

Probability of an uptrend

Daily and/or Weekly close above 1.3170 can easily result in the price increase towards 1.3300. But only clean break and close above 1.3300 resistance might invalidate bearish outlook and price is likely to enter the consolidation phase.

Support: 1.2944, 1.2768, 1.2592, 1.2342, 1.2192

Resistance: 1.3170, 1.3300

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