The Sterling on the Daily Chart has been following a downward path since 24 February 2021, having found resistance at the 1.42400 level. The formation of the Japanese candlestick reversal pattern known as Shooting Star Pattern signalled the very beginning of the downward bias.
The attractive price enticed sellers who entered the market with short positions and as a result they have pushed the Pound Sterling to lower levels, following a pattern of successively lower tops and lower bottoms.
Subsequently, the currency pair formed an Inverted Hammer near the support level of 1.37774 which hinted at the end of the decline and the potential beginning of a rally.
Upon applying Technical analysis on the price chart, one can see that the Japanese candlestick after the Inverted Hammer managed to close above the 10-period Exponential Moving Average line, a fact that also points to the upward direction and the bullish bias in the market.
Additionally, the Relative Strength Index Oscillator registers values above the fifty line, which also confirms the positive sentiment in the market.
Both technical indicators, as well as the Japanese candlestick reversal pattern, are in agreement in terms of the Pound’s upward bias.
Furthermore, the current price is trading above the downward trend line, which also implies that demand is greater than supply.
Fibonacci Price Levels
Applying the Fibonacci Retracement tool to the high price of the Bullish Japanese candlestick at the price of 1.39373 and dragging it down to the low price of the pattern at the price of 1.37774, three price targets may be calculated;
- The first price target is estimated at 1.40972 (200%)
- The second price target is seen at 1.42571 (300%)
- The third price target is projected at 1.44170 (400%)
Of course, it remains to be seen whether the crowd psychology will allow bulls to take control of the market and push Sterling higher.
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