GBPUSD reached a support level, making a price retrace close to the downtrend line. The retrace happened after the decline of last week which returned the price back inside the downtrend channel.
We can see a price reaction close to the current support at 1.34123 where the price two days in a row, Monday and Tuesday, had a wick on the bottom side. That was an indication the price has reached support which will put pressure on the price.
That pressure held the price for a while, but on Wednesday the price closed below Monday and Tuesday low which meant it will continue moving down.
On Thursday the price dropped below the support level and stayed below. Friday showed a small retrace because of the end of the week and traders were cashing out from the market.
The week started with a bullish candle which presents bullish strength on the support level. This support at 1.34123 had held the price in the past when the price was falling down.
We can expect the price to return back to the downtrend channel line around 1.35000 and continue to move down. The price could move down because of resistance and sellers that pushed the price to the current support level.
From the resistance level at 1.35000, we can expect the price to get back to 1.34123. If the price closes below 1.34123 first support will be at 1.33000. To enter into the trade it would be good to wait for a bearish price action signal around 1.35000.
Stop loss would be at 1.36200 which is above previous resistance where candles had problems closing above. So if the price manages to close above this level then it will be a sign of bullish strength.
The profit target would be at 1.33000 which is the first support below the current support level that is broken.
While the price is currently in the bearish sentiment bulls need to take the price above 1.36200 in order to change the sentiment from bearish to bullish. Until that happens the market will be in bearish sentiment and we can look for bearish opportunities.
Frano is an engineer, author, forex trader and the owner of a blog where he teaches forex courses for beginners. Frano created a website on how to trade forex to share his knowledge, market analysis which is also published on forexFactory.com, investing.com and many other trading related websites.