Weekly closing price: 1.3189
Since early October, the British pound has been consolidating underneath a weekly plotted at 1.3301. Although the market did chalk up a reasonably healthy gain last week, let’s not forget that three weeks prior to this, three consecutive candles had printed, each one tapping the underside of the noted weekly resistance!
Capping downside in this market, however, is a daily seen at 1.3058-1.2979, along with an interconnecting daily support extended from the low 1.2108. One other thing to keep in mind here is the fact that the market, at least from current price on the daily scale, displays room to rally as far north as 1.3279: a daily Quasimodo resistance line. Considering that 1.3279 is located only a few pips beneath the said weekly resistance, this suggests the possibility of an additional test of this weekly line this week.
The impact of Friday’s UK manufacturing figures elevated the GBP, breaking above mid-level resistance 1.3150 which shortly after was retested as support. H4 bulls continued to reassert dominance from this point, consequently concluding the day’s session whipsawing through the 1.32 handle and closing at 1.3189. The other key thing to note here is the H4 formation (black arrows) currently in play. Notice how price tapped the 127.2% Fib ext. point at 1.3216 (and the 61.8% Fib resistance at 1.3214) before closing sub 1.32.
Suggestions: In view of the higher-timeframe candles potentially being drawn back up to the 1.33 neighborhood this week, a short from the 1.32 handle is somewhat chancy, despite strong H4 confluence surrounding the number! The most we see H4 price tumbling to from 1.32 is the nearby support coming in at 1.3173. For that reason, this is not a trade we would brand high probability.
As such, opting to stand on the sidelines here may very well be the best path to take today.