FX.co ★ GBP/USD Intraday Technical Analysis and Trading Recommendations for April 12, 2012

From 1.5600 to 1.6060 the GBP/USD pair was considered as bullish as it was moving within the depicted bullish channel which has been broken through last week.
The GBP/USD pair showed the massive bearish reaction after testing the 1.6060 level and breaking down 1.5880 - the prominent support level, reaching the point 1.5830, which is a support level on the 4H chart (50% Fibonacci level).
The massive bearish reaction that was able to break down the lower limit of the depicted channel favours the bearish prospective rather than bullish one. However, having failed to break through 1.5830 for two successive times, it managed to bring bullish strength into the market since then probably having aimed at 1.5960 - 1.5990, hence as expected, 1.5830 constituted a solid short-term BUY entry towards 1.5945-1.5970.
What favoured the expected short-term bullish retracement is that the pair was trapped between 1.5880 and 1.5830 forming a confirmed short-term Head & Shoulders reversal pattern to be targeting to the backside of the lower limit of the broken channel to complete the right shoulder of the major Head & Shoulders pattern.
Proceeding from the former price action to the current price zone 1.5830-1.6060 we can see that the GBP/USD pair is probably forming a H&S reversal pattern with neckline at 1.5830 and the right shoulder that is expected to be placed around 1.5945-1.5970 which constitutes a valid low/risk SELL entry.
Breakthrough above the last recorded high at 1.6062 invalidates the bearish scenario. However, a breakdown of 1.5830 will confirm the reversal pattern allowing the GBP/USD to reach 1.5777 and 1.5650.