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On January 21, after the GBP/USD pair moved below 1.4340, evident signs of a bullish recovery were expressed around 1.4075. Hence, previous weekly candlesticks closed above 1.4340 again.
Bullish persistence above 1.4488 was mandatory to maintain enough bullish strength in the market. The first bullish target was seen at 1.4615 where the most recent bearish swing was initiated.
As previous weekly candlesticks maintained their bearish persistence below the depicted demand zone (below 1.4340), the next demand level located at 1.3845 (historical bottom that goes back to March 2009) provided significant bullish rejection on February 26.
As expected, an evident bullish recovery and a bullish engulfing weekly candlestick were expressed around 1.3850 (prominent weekly demand level). That is why, a valid buy entry was suggested near the same level.
Recently, the price zone of 1.4340-1.4488 has been a significant supply zone during the past few weeks.
That is why, evident bearish rejection should be expected around the current supply zone of 1.4340-1.4488. The nearest destination for the GBP/USD pair would be located at 1.3845.
A recent lower high was achieved around the level of 1.4530. This applied extensive bearish pressure against the price level of 1.4340.
Hence, an extensive bearish breakout below 1.4340 was expressed on the daily chart. The GBP/USD pair looked oversold few weeks ago.
That is why, signs of a bullish recovery and a profitable long entry were expected around 1.3850. A recent bullish swing was expressed towards the price levels around 1.4400.
The price zone of 1.4340-1.4490 constituted a significant supply zone where a Head and Shoulders reversal pattern was expressed. Estimated bearish targets are located at 1.4060, 1.3960 and 1.3800.
On the other hand, when the market failed to push below the price level of 1.4050 on April 7, a bullish movement was executed towards the price levels of 1.4340 where strong bearish rejection and a valid SELL entry were offered again.
Initial bearish target should be located at 1.4050 where the neckline of the head and shoulders reversal pattern is located.
This week, daily persistence below 1.4050 (reversal pattern neckline) will be needed to enhance further bearish decline towards 1.3950 and 1.3800.
Otherwise, the GBP/USD pair will remain trapped between the price levels of 1.4050 and 1.4340.
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