FX.co ★ Technical Analysis of GBP/USD for January 15, 2024

Understanding Current Market Dynamics of GBP/USD

The British Pound against the US Dollar, known as the GBP/USD pair, has shown a tendency to test the upper level of 1.2783 multiple times recently. However, the lack of a decisive breakthrough suggests a potential return to the consolidation zone, ranging between 1.2684 and 1.2747. The pair's current resistance is observed at 1.2783 and 1.2793, while support lies at 1.2673 and 1.2689.

Indicator Analysis on H4 Time Frame Chart:

1. Pin Bar Formation: The emergence of a Pin Bar near the support level indicates a rejection of lower prices, hinting at a possible upward trend.
2. Swing High as Resistance: The Swing High, marked on the chart, represents a resistance level where the price has previously peaked and then declined, suggesting future resistance.
3. Moving Averages: The 100-period Exponential Moving Average (EMA) and the 50-period Double Exponential Moving Average (DEMA) show the price fluctuating between these averages, pointing towards a neutral to slightly bullish market sentiment.
4. Trendline Support: A rising trendline is visible, consistently acting as support and indicating the market's responsiveness to this line.
5. RSI Indicator: The Relative Strength Index (RSI) hovering around 50 signifies a neutral market momentum without a clear direction.

Potential Market Scenarios

• A bullish signal is anticipated if the price stays above the ascending trendline and the RSI trends upwards past 50, further confirmed by a breakout above the 50 DEMA.
• Conversely, a bearish momentum may be signaled if the price breaks below the trendline and the RSI falls under 50, especially if it drops below the 100 EMA.

Intraday Indicator Signals and Sentiment Scoreboard

The intraday indicators show a mix of sell and buy signals, with a slight leaning towards sell. The sentiment scoreboard reflects a bullish tendency (58% bulls vs. 42% bears), although there is a recent shift towards bearish sentiment over the last three days (45% bulls vs. 55% bears).

Weekly Pivot Points

The weekly pivot points for GBP/USD are:

• Resistance 3 (WR3) at 1.28232
• Resistance 2 (WR2) at 1.27864
• Resistance 1 (WR1) at 1.27714
• Pivot Point at 1.27496
• Support 1 (WS1) at 1.27346
• Support 2 (WS2) at 1.27128
• Support 3 (WS3) at 1.26760

Weekly Trading Outlook:

Elliott Wave Theory: The numbers (1), (2), etc., indicate an Elliott Wave pattern. Elliott Wave Theory proposes that markets move in repetitive cycles due to investor psychology. The pattern displayed here appears to be an impulsive wave, with waves 1, 3, and 5 typically being the trend-following waves, and waves 2 and 4 being corrective waves. Wave (2) shows a retracement, which is normal after an impulsive wave 1. If this is the start of a bullish trend, wave (3) should ideally extend beyond the peak of wave (1), which it seems to have done.

Ascending Trendline: The yellow ascending trendline has been supporting the price action since the low marked by wave (2). This trendline is crucial for the bullish scenario to remain valid.

Directional Movement Index (DMI): The DMI lines (DI+, DI-, and ADX) are indicating a strong trend presence since the ADX is above 25. However, the convergence of the DI+ and DI- lines suggest that the trend may be losing some momentum.

Exponential Moving Average (EMA): The price is currently above the 55-period EMA, which is typically a bullish sign. Traders often look for prices to be above a significant moving average to confirm a bullish trend.

Elliott Wave Oscillator (EWO): The histogram appears to be decreasing in momentum, as shown by the shorter bars, which could indicate the end of wave (5) or a possible correction phase.

Resistance Level: The MAX line indicates a strong resistance level that has been tested multiple times. Price reactions near this level could be pivotal for the next major move.

Support Level: The MIN line indicates a strong support level. If the price retraces, how it behaves near this line could indicate whether the bullish trend will continue or if a bearish reversal is imminent.

Considering these technical elements, the market may currently be in the late stages of a bullish Elliott Wave cycle. Traders might watch for potential retracement or consolidation before the next impulsive wave begins, if the pattern continues. The EWO suggests waning momentum, which aligns with the completion of an Elliott Wave cycle.

Here are some points to consider:

Wave (5) completion: If wave (5) is indeed completing, traders would watch for a potential reversal or the start of a corrective wave pattern.

EMA and Price Action: The price staying above the 55 EMA is bullish, but a close below this average could signal a change in trend.

DMI Indicators: A crossover of the DI+ and DI- lines, especially with the ADX remaining high, could indicate a shift in trend direction.

Resistance at MAX: If the price reaches and surpasses the MAX line with strong momentum, it could suggest a continuation of the bullish trend. Conversely, repeated rejections could lead to a trend reversal.

Support at MIN: This will be crucial if a retracement begins. A strong bounce from the MIN level could mean the bullish trend is still intact, while a break below could signal a longer-term trend change.

Concluding Insights: Balancing Risks and Opportunities

Traders should cautiously monitor these technical indicators and pivot points for potential trading opportunities in the GBP/USD market. As market conditions are subject to change, staying informed and agile is crucial. It is important to remember that trading involves risks and to consider both potential profits and losses in any trading strategy.

Useful Links

• More Artcles
• InstaForex Course for Beginners
• Open Trading Account

Important Notice

The begginers in forex trading need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp market fluctuations due to increased volatility. If you decide to trade during the news release, then always place stop orders to minimize losses.

Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. For successful trading, you need to have a clear trading plan and stay focues and disciplined. Spontaneous trading decision based on the current market situation is an inherently losing strategy for a scalper or daytrader.

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