Few months ago, the market was pushed above the depicted level of 1.5550 trying to reach the zone of 1.5900 where the depicted Head and Shoulders pattern was formed.
In November 2015, a bearish engulfing weekly candlestick closed below the level of 1.5200 (the neckline of the Head and Shoulders pattern). This supported the bearish side of the market in the long term.
Extensive bearish pressure has been applied to the demand levels of 1.4620 and 1.4360. Both of them were broken to the downside.
Shortly after the GBP/USD pair moved below 1.4220, evident signs of bullish recovery were expressed around 1.4075. Hence, the previous few weekly candlesticks closed above 1.4220 indicating strong bullish demand.
Bullish persistence above 1.4360 was mandatory to maintain enough bullish strength in the market. The first bullish target was seen at 1.4615.
Any signs of a bearish rejection around 1.4615 should be taken into consideration as it corresponds to a broken weekly demand level, which is now acting as supply.
On the other hand, the price zone of 1.4360-1.4220 remains a significant demand zone for the GBP/USD pair. A bullish engulfing weekly candlestick was expressed on the chart.
During 2015, a significant bearish rejection was expressed around 1.5770 and 1.5230 where a bearish Head and Shoulders reversal pattern was formed. Since then, the market has been trending downwards within the depicted bearish channel.
Few weeks ago, the level of 1.4950 was broken to the downside, constituting a significant supply level.
Daily persistence below 1.4800 (the lower limit of the depicted bearish channel) favored a bearish decline towards 1.4680 and 1.4610 where previous prominent bottoms were located on the GBP/USD daily chart.
Recently, the GBP/USD pair looked oversold as it moved further below the prominent demand levels of 1.4620 and 1.4360.
That is why the depicted signs of a bullish rejection around the demand level of 1.4220 were considered to be a valid buy signal.
Bullish persistence above 1.4360 was mandatory to maintain enough bullish strength in the market. The first bullish target at 1.4615 has been already reached.
A daily closure above 1.4620 allows the pair to make a quick bullish movement towards the next resistance level of 1.4800. However, evident signs of bearish rejection were expressed around 1.4620 as expected in previous articles.
That's why a bearish pullback towards 1.4360 is expected. This is where a valid buy entry can be offered.
Risky traders could have a valid sell entry anywhere around 1.4620. S/L would be set as a daily candlestick closure above 1.4630.
Conservative traders should wait for signs of bullish reversal around 1.4360 as a buy signal. S/L should be set as a daily closure below 1.4330.