GBPUSD TRADE SETUP

21 jul 2022

After breaking the bearish market structure, GBPUSD printed a new weekly high a few pips shy of 1.2050. From a four-hour lens, the price looks likely to complete an inverse head and shoulders reversal pattern. The potential right-shoulder support zone coincides with the impulse leg's 50-61.8% Fibonacci retracement levels. However, it's possible to see a deeper retracement down to 78.6%. Within the regions mentioned above, we will look for reversal triggers or rejection of prices to capitalize on a long trade. Should the market break the neckline, another potential long opportunity awaits us after a retest and rejection of prices at the neckline. Supportively, the U.S. Dollar index, DXY, which tracks the strength of the greenback against a basket of major currencies, broke its bullish structure, thus suggesting weakness in the dollar.

PS: Trading is reactive, not predictive; until reversal signals confirm this bullish bias, don't long.

You might like to watch some pairs: GBPUSD, EURUSD, USDCHF, and XAUUSD.

H&S Pattern
According to Investopedia, this pattern is identified when the price action of security meets the following characteristics: the price falls to a trough and then rises; the price drops below the former trough and then rises again; finally, the price falls again but not as far as the second trough. Once the final trough is made, the price heads upward toward the resistance found near the top of the previous troughs.

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