FX.co ★ Weekly technical levels of GBP/USD for September 22-26, 2014

Overview:

The market continues showing signs of strength following the break at 1.6161 (resistance has become support). Therefore, the GBP/USD pair resistance has been broken and it was turned to support last week. Moreover, the pair has already formed a strong support at the level of 1.6161. So, the market indicates a bullish opportunity at the level of 1.6161 with the first target of 1.6350 and continues towards 1.6485 (but in the long term). However, if the trend fails to break this level and closure above 1.6161, then a downside momentum is rather convincing and the structure of the fall does not look corrective. Additionally, the market will indicate a bearish opportunity at 1.6150, hence it will be a good sign to sell at this level with targets at 1.6120 and 1.6065.

Comment and observations:

• If the trend is buoyant, then the strength of the currency pair will be defined as following: GBP is in uptrend and USD is in downtrend.
• Fibonacci retracement is used for determining accurate psychological levels of support and resistance. The period of time should be taken into account.
• Fibonacci is in a range trade; it looks like the trend is trapped moving up or down. If you sell or buy in the long-term period, you will surely lose your profit.
• About the pivot point: R3 and S3 are considered to be clear indicators of the maximum range of extreme volatility, though it is possible to pass them through. Pivot lines work well in the sideways markets, as the prices are most likely to be situated between the R1 and S1 lines. Within a strong trend, the price is expected to be lower than the pivot point line and continue moving. If the breaking news released may affect the market, the price is likely to go straight through R1 or S1 and even reach R2 and R3 or S2 and S3.