/GBPUSD climbs back above the neckline. Up trendline works! | by Author: | FXStreet

GBPUSD climbs back above the neckline. Up trendline works! | by Author: | FXStreet

This week, on the main Forex pairs, starts perfectly. Well, depending from which position you have but what we mean is, that the movements are very technical and at some point, predictable. I’m afraid that it only applies to the price action traders, which are trend followers. I am a forex educator for the past ten years and I know that, unfortunately, retail traders like to go against the trend.   That being said, let me show you a very interesting setup on the GBPUSD . Recently, the pair had a strong correction, which was triggered by the Head and Shoulders pattern. After that, the price broke the neckline (green) and created the bearish flag (black lines). As anticipated, the flag resulted with a further drop and the cable got a chance to test the long-term up trendline (red), connecting higher lows since the November 2017. What is more, it was an area with the horizontal support on the 1.3985 (purple). As you could imagine, those two supports coming together create a great occasion for a bounce. The price did reverse and to be honest with you, the size of the upswing is quite impressive. We managed to break the upper line of the bullish wedge (blue line, created in a meantime) and came back above the neckline. That finished the bearish sentiment here and created a legitimate, long-term buy signal on the GBPUSD.   Positive sentiment will be denied, once the price will break the purple support. Even coming back below the neckline will not be catastrophic as it is possible that the price, before climbing any higher, would like to test, the recently broken, upper line of the wedge (blue).