Weekly
• Last Candlesticks pattern: Shooting star
• Time of formation: 31 Jul 2017
• Trend bias: Down
Daily
• Last Candlesticks pattern: Morning star
• Time of formation: 25 Aug 2017
• Trend bias: Near term up
GBP/USD – 1.3211
Although cable fell briefly to 1.3070 late last week, lack of follow through selling on break of previous support at 1.3088 and the subsequent rebound formed a doji star (with a long lower shadow) followed by a white candlestick, suggesting further choppy trading would be seen and recovery to 1.3225-30 cannot be ruled out, however, still reckon upside would be limited to 1.3279-87 resistance area and bring retreat later. A daily close above this level would suggest the retreat from 1.3338 has ended at 1.3070, then another leg of corrective rise from 1.3027 low would take place for test of 1.3338, break there would extend gain to 1.3400, then test of previous resistance at 1.3455 which is likely to hold on first testing.
On the downside, whilst pullback to 1.3140-50 cannot be ruled out, said support at 1.3070 should remain intact and bring another rebound later. A break below this level would revive bearishness and bring retest of recent low at 1.3027 but only a drop below this level would confirm early decline from 1.3658 top has resumed and extend weakness to 1.3000, then towards 1.2940-50 later.
Recommendation: Stand aside for this week.
On the weekly chart, despite last week’s fall to 1.3070, lack of follow through selling on break of previous support at 1.3088 and the subsequent bounce suggest sterling has remained confined within near term established range, hence further sideways trading is in store and recovery to 1.3225-30 cannot be ruled out, however, as outlook remains consolidative, reckon upside would be limited to 1.3279-87, price should falter below resistance at 1.3338 and bring retreat later. Only above 1.3338 would signal the retreat from 1.3658 has possibly ended, bring a stronger rebound to 1.3400-05 and possibly towards but price should falter well below said resistance at 1.3658. In the event sterling breaks above 1.3571 resistance, this would bring a retest of this last month’s high at 1.3658, break there would extend recent erratic rise from 1.1986 low to 1.3750-60 and 1.3800 but overbought condition should prevent sharp move beyond 1.3860 (61.8% Fibonacci retracement of 1.5018-1.1986).
On the downside, expect pullback to be limited to 1.3125-30 and said support at 1.3070 should hold, bring another rebound. A weekly close below 1.3070 support would signal the rebound from 1.3027 low has ended, bring retest of 1.3027, break of this support would add credence to our view that top has been formed at 1.3658, bring further fall to 1.3000, then towards support at 1.2909, however, anticipated near term oversold condition should prevent sharp fall below previous chart support at 1.2774 and price should stay well above another previous chart support at 1.2589, bring rebound later.
