GBP/USD Candlesticks and Ichimoku Analysis

Weekly

• Last Candlesticks pattern: Shooting star
• Time of formation: 5 Sep 2016
• Trend bias: Down

Daily

• Last Candlesticks pattern: Long black candlestick
• Time of formation: 24 Jun 2016
• Trend bias: Down

GBP/USD – 1.2190

As cable has recovered after falling to 1.2135 last week, suggesting initial consolidation above this level would be seen and corrective bounce to the Tenkan-Sen (now at 1.2270) is likely, however, reckon resistance at 1.2301 would limit upside and bring another decline, a break of said support at 1.2135 would extend recent decline from 1.2706 to 1.2100. Looking ahead, below 1.2100 would signal the rebound from 1.1986 low has ended, then further fall to 1.2050-60 would follow, however, still reckon downside would be limited and price should stay well above support at 1.1986, bring rebound later.

On the upside, although initial recovery to 1.2300-05 cannot be ruled out, reckon said previous support at 1.2347 would turn into resistance and cap cable’s upside, bring another decline later. A daily close above the Kijun-Sen (now at 1.2359) would defer and risk a stronger rebound to 1.2400 but only a sustained breach above the upper Kumo (now at 1.2453) would signal the fall from 1.2706 has ended instead, risk a stronger rebound to 1.2500 but price should falter well below resistance at 1.2570.

Recommendation: Sell at 1.2340 for 1.2140 with stop above 1.2440. 

On the weekly chart, although cable extended recent decline to 1.2135 last week, the subsequent recovery suggests consolidation above this level would be seen and recovery to 1.2299-1.2301 (current level of the Kijun-Sen and previous resistance) cannot be ruled out, however, reckon upside would be limited to previous support at 1.2347 (now resistance) and bring another decline later. A break of 1.2135 would extend the fall from 1.2706 to 1.2100, however, if our view that a temporary low formed at 1.1986 is correct, downside should be limited and reckon 1.2050 would hold, bring another rebound later. In the event cable drops below support at 1.1986, this would shift risk back to downside for medium term downtrend to extend weakness to 1.1900-10, then 1.1850.

On the upside, whilst initial recovery to 1.2300 cannot be ruled out, renewed selling interest should emerge around previous support at 1.2347 (now resistance) and bring another decline later. Above 1.2400 would defer and risk rebound to 1.2479 but break there is needed to suggest low is formed, bring a stronger rebound to 1.2570, however, a weekly close above there is needed to signal the retreat from 1.2706 has ended, bring further gain to 1.2650-60, then retest of 1.2706.