Overview:

The GBP/USD pair has been moving downwards respecting the depicted bearish channel since mid-September when the ongoing channel was initiated. Many bearish impulses were previously initiated around 1.6450, 1.6170, and 1.5940 where the upper limit of the channel came to meet the pair.

The price zone of 1.5890-1.5870 constituted a transient daily support that paused the bearish movement for a few days. However, bears quickly managed to push lower.

Bullish fixation above 1.5890-1.5900 was essential to maintain the bullish scenario. However, bears have failed to do so. Instead, the market pushed towards support level located around 1.5600 where the lower limit of the ongoing channel was previously located.

The GBP/USD pair looked quite oversold. Bullish correction was anticipated as the pair has tested a prominent WEEKLY support (price level of 1.5600 ) corresponding to multiple previous tops established back in May and June 2013.

On the other hand, a break below the recent bottom around 1.5580 invalidates this bullish scenario and renders the current movement as a bearish flag pattern with projection target at 1.5410.

Trading recommendations:

As anticipated, a previous valid BUY opportunity was suggested at retesting of the same price zone 1.5610-1.5620. This position was running in profit until bearish pull-back took place towards entry levels again. Another BUY entry may be offered at retesting which is taking place now. TP levels should be set at 1.5760, 1.5820 and 1.5880.

On the other hand, a low risk SELL entry will probably be offered around 1.5880-1.5940 ( Important Fibonacci Levels and the upper limit of the depicted bearish channel ) with SL located just above 1.5950.