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
(Click on image to enlarge)
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.
(Click on image to enlarge)
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