In November 2015, a bearish engulfing weekly candlestick closed below the level of 1.5200 (the neckline of the Head and Shoulders pattern). This enhanced the bearish side of the market in the long term.
Extensive bearish pressure has been applied against 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, previous weekly candlesticks closed above 1.4220 and 1.4360 again, 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.
However, recent bearish rejection was expressed at 1.4615 (a broken weekly demand level). It is currently acting as a strong supply level.
The price zone of 1.4300-1.4200 remains a significant demand zone to be watched for a possible buy entry similar to what happened few weeks ago.
On the other hand, If the current weekly candlestick maintains its bearish closure below the depicted demand zone (below 1.4200), the next weekly demand level will be located at 1.3850 (a historical bottom that goes back to March 2009).
On February 4, the market failed to close above 1.4615. An inverted hammer daily candlestick was expressed. Hence, a bearish pullback took place towards 1.4360.
Note that the GBP/USD pair remains trapped between 1.4615 and 1.4220 until a breakout occurs in either direction. These levels are important key levels that determine the next destination of the pair.
Note that a recent lower high was established at the level of 1.4530, which enhanced the current bearish momentum towards the demand levels of 1.4360 and 1.4220.
Although a bearish breakout below 1.4220 is being manifested on the daily chart, signs of bullish recovery should be expected around the current price levels down to 1.4075.
Taking into consideration what happened back on January 21, bullish reversal and a valid buy entry remain possible as long as the market keeps defending the territory of 1.4100-1.4070.
If not, the bullish reversal scenario would be replaced with bearish one with a potential target at 1.3850.
The territory of 1.4220-1.4120 remains a demand zone to be watched for a possible buy entry similar to what happened in January 2016.
On the other hand, conservative traders should wait for a bullish closure above 1.4200 and 1.4360 to have a valid buy entry. Initial T/P level would be located at 1.4530.