the GBP/USD is showing a lengthy bearish reversal since the end of February 2021. More recently, price action has bounced at the previous bottom (blue box) creating a double bottom.
The GBP/USD is now stuck between support and resistance but a breakout could offer the needed clarification. Let’s review.
Price Charts and Technical Analysis
The GBP/USD seems to have completed a bearish 5 wave pattern (purple). This could be part of a larger bearish ABC pattern (red).
- Currently price action is probably in a bullish wave C (purple), which could complete the wave B (red) of a larger ABC (red).
- The double bottom could have completed the wave c (pink) of wave B (purple).
- A bullish breakout (green arrows) above the resistance trend line (orange) and long-term moving averages would confirm this analysis.
- The main upside targets are the previous tops (red boxes).
- A bearish bounce at the resistance (orange arrows) could end the wave B (red) and start the wave C (red),
- A bearish push could retest the support line (green) and bounce (blue arrow).
- A bearish breakout below the support (green) could indicate a downtrend (red arrows). In that case, price action could be completing a bearish 123 (black) and the bullish correction is invalidated.
On the 1 hour chart, blue SWAT candles indicate a bullish trend. But a breakout remains key for confirming any upside:
- A push above wizz 4 level with strong price action could confirm the breakout (green arrows).
- The bullish break could confirm the wave 3 (green) of 3 (grey) within the larger wave C (pink) of the 4 hour chart.
- A bearish breakout (red arrow), however, indicates that the upside was not a wave 1-2 but an ABC (orange) pattern.
The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter.