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Forex Strategy: GBP/USD Eyes 1.6600 Following Bullish Engulfing Pattern

Forex Strategy: GBP/USD Eyes 1.6600 Following Bullish Engulfing Pattern

David de Ferranti, Currency Analyst

Talking Points

  • GBP/USD Technical Strategy: Sidelines preferred
  • Former support-turned-resistance at 1.6600 may limit bounce
  • Dark Cloud Cover on weekly warns of larger correction

The Pound has retraced some of its recent declines following the break below the range-bottom at 1.6600. However, the absence of a bullish reversal signal on the daily is notable, which suggests that the bulls may run out of steam as we head back towards the original breakout point.

GBP/USD: Retracement May Falter

Forex-Strategy-GBPUSD-Eyes-16600-Following-Bullish-Engulfing-Pattern_body_Picture_3.png, Forex Strategy: GBP/USD Eyes 1.6600 Following Bullish Engulfing Pattern

Daily Chart - Created Using FXCM Marketscope 2.0

Drilling down to the four hour chart; a reversal signal is indicated by the Bullish Engulfing formation near support at 1.6460. A bearish pattern is lacking in intraday trade suggesting the potential for further gains in the session ahead with sellers likely to emerge at the 1.6568/70 mark.

GBP/USD: Bulls Move In After Reversal Pattern in Intraday Trade

Forex-Strategy-GBPUSD-Eyes-16600-Following-Bullish-Engulfing-Pattern_body_Picture_2.png, Forex Strategy: GBP/USD Eyes 1.6600 Following Bullish Engulfing Pattern

4 Hour Chart - Created Using FXCM Marketscope 2.0

The ominous Dark Cloud Cover formation on the weekly at multi-year resistance also remains on the radar, and is threatening a more significant correction ahead for the Pound. A potential target is offered by the 23.6% Fib Retracement Level near 1.6350.

GBP/USD Weekly Continues To Offer Warning

Forex-Strategy-GBPUSD-Eyes-16600-Following-Bullish-Engulfing-Pattern_body_Picture_1.png, Forex Strategy: GBP/USD Eyes 1.6600 Following Bullish Engulfing Pattern

Weekly Chart - Created Using FXCM Marketscope 2.0

By David de Ferranti, Market Analyst, FXCM

Follow David on Twitter: @Davidde

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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