The GBPUSD currency pair on the Daily Chart has been following a downward path since 10 June 2020, having found resistance at the 1.28120 level. The formation of the Japanese candlestick reversal pattern known as Shooting Star Pattern signalled the very beginning of the downward bias.
The high prices attracted 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 a Bullish Engulfing pattern near the support level of 1.22505 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 Bullish Engulfing pattern 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 pair’s upward bias.
Furthermore, the current price is trading above the downward trend line, which also implies that demand is greater than supply.
Applying the Fibonacci Retracement tool to the high price of the Bullish Japanese candlestick at the price of 1.24897 and dragging it down to the low price of the pattern at the price of 1.22505, three price targets may be calculated: –
- The first price target is estimated at 1.27289 (200%),
- The second price target is seen at 1.29681 (300%),
- The third price target is projected at 1.32073 (400%).
Of course, it remains to be seen whether the crowd psychology as well as the buyers’ pressure will manage to maintain the control of the market and pull GBPUSD currency pair higher.
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