GBPUSD Tight consolidation. Prepare to trade the break-out.

26 Jan

The GBPUSD pair has been trading sideways within the very tight range formed by the 1D MA50 (blue trend-line) and the top (Lower Highs trend-line) of an emerging Channel Down pattern. In fact while the 1D MA50 has been holding since January 17, the Lower Highs have since December 28, already with 3 clear rejections on them.

This technical squeeze will naturally break in the coming days and technically the way it first breaks to, that will be the dominant trend for the next 4-6 weeks. If it closes a 1D candle below the 1D MA50, before the 1D MACD forms a Bullish Cross, we will sell and target the bottom of the 1 year Channel Up at 1.2250. If it closes above Resistance 1 (1.2825) while forming a 1D MACD Bullish Cross, we will buy and target the next Resistance at 1.3150.

The reason we use the 1D MACD as a parameter is that every full Bullish Cross it made below the 0.00 barrier, was the start of very aggressive rallies. The times that failed to complete it (e.g. August 22 2023), it extended an already strong downtrend.

Notice also the relevance of the 1D Golden and Death Crosses. The last 1D Death Cross (October 17 2023) formed a market bottom and started a rise, while the 1D Golden Cross before it (January 11 2023), led to a market top and declined, both of which are the opposite of their technical expectations. Currently we are after a 1D Golden Cross (January 05 2024), so if the previous inverse correlation applies again, it should favor a bearish trend.


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