• Last Candlesticks pattern: Shooting star
• Time of formation: 31 Jul 2017
• Trend bias: Down
• Last Candlesticks pattern: Morning star
• Time of formation: 25 Aug 2017
• Trend bias: Near term up
GBP/USD – 1.3445
Although the British pound found support at 1.3303 and has staged a strong rebound, if our view that a temporary top formed at 1.3550 is correct, upside would be limited to 1.3490-00 and price should falter well below said recent high, bring another retreat, below 1.3340-45 would bring retest of 1.3303 but break there is needed to add credence to this view and extend the corrective fall from 1.3550 for weakness to 1.3260-70, having said that,only a daily close below indicated support at 1.3221 retain bearishness, bring further fall to 1.3185-90 and later towards 1.3130 but sharp fall below there should not be repeated and price should stay above previous support at 1.3062.
On the upside, whilst initial marginal gain from here cannot be ruled out, reckon upside would be limited to 1.3500 and said resistance at 1.3550 should remain intact. Only a break above this recent high would abort and signal the rise from 1.3027 has resumed instead, bring further subsequent headway to resistance at 1.3596, however, still reckon upside would be limited and price should falter below another previous chart resistance at 1.3658 (this year’s high).
Recommendation: Hold short entered at 1.3460 for 1.3260 with stop above 1.3560.
On the weekly chart, although sterling slipped initially this week to 1.3303, as cable continued finding good support just above the Tenkan-Sen (now at 1.3295), suggesting further consolidation would be seen, however, still reckon upside would be limited to 1.3500 and price should falter below recent high at 1.3550, bring another retreat later, below said support at 1.3303 would add credence to our view that top has possibly been formed, bring further fall to support at 1.3221, once this level is penetrated, this would add credence to this view, bring further fall to 1.3130 and later towards strong support at 1.3062. Looking ahead, only a drop below 1.3027 support would revive bearishness and signal top has indeed been formed at 1.3658, bring a stronger correction of early rise to 1.3000, then towards support at 1.2909.
On the upside, expect recovery to be limited and 1.3500 should hold, bring another retreat later. Above recent high at 1.3550 would shift risk back to the upside and extend the rise from 1.3027 to 1.3600, then test of last month’s high at 1.3658, break there would confirm medium term rise from 1.1986 low has resumed for headway to 1.3750-60 and 1.3800 but anticipated overbought condition should prevent sharp move beyond 1.3860 (61.8% Fibonacci retracement of 1.5018-1.1986).