In November 2015, a bearish engulfing weekly candlestick closed below the level of 1.5200 (neckline of the Head and Shoulders pattern). This enhanced the bearish side of the market in the long term.
Extensive bearish pressure was applied to the demand levels of 1.4620 and 1.4360. Both of them were broken to the downside.
On January 21, after the GBP/USD pair moved below 1.4220, evident signs of a bullish recovery were expressed around 1.4075. Hence, previous weekly candlesticks closed above 1.4220 and 1.4360 again.
Bullish persistence above 1.4360 was mandatory to maintain enough bullish strength in the market. The first bullish target was seen at 1.4615 where the current strong bearish momentum was initiated.
As previous weekly candlesticks maintained their bearish persistence below the depicted demand zone (below 1.4200), the next weekly demand level was located at 1.3845 (historical bottom that goes back to March 2009).
As expected, evident bullish recovery and a bullish engulfing weekly candlestick were expressed around 1.3850 (prominent weekly demand level). Hence, a valid buy entry was suggested near the same price level.
On the other hand, the price zone of (1.4222-1.4360) now constitutes a significant supply zone to be watched for possible bearish rejection. Otherwise, further bullish advancement towards 1.4620 should be expected.
The GBP/USD pair was trapped between 1.4620 and 1.4220 until a recent lower high was established at the level of 1.4530. This applied extensive bearish pressure to the price level of 1.4220.
Hence, an extensive bearish breakout below 1.4220 was expressed on the daily chart (GBP/USD looked oversold last week).
That is why, signs of bullish recovery and a possible long entry were expected around 1.3850. A recent bullish swing is currently being expressed towards 1.4220.
The broken demand zone (1.4222-1.4360) now constitutes a significant supply zone to offer bearish rejection.
Early signs of a bearish rejection are already being expressed around 50% Fibonacci level (depicted on the daily chart).
Note that the price level of 1.4030 is now standing as a prominent key level to offer bullish support if any bearish pullback occurs soon.
Price action should be watched around the price zone of 1.4222-1.4360 for a valid SELL entry. S/L should be placed above 1.4370. Initial T/P levels should be located at 1.4100 and 1.4050.
On the other hand, risky traders can wait for signs of bullish recovery around 1.4030 if any bearish pullback occurs soon.