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Do you use the Fibonacci retracement tool?

In this video, we use the tool and a specific level to identify trend reversal opportunities.

GBPUSD is the chart we analyse as we could see some further downside this week.

Watch the video to see how we use the Fibonacci tool for a short opportunity on GBPUSD…

Hi, and welcome to this Blueberry Markets video update with me, John Kibbler, Head Currency Analyst.

In this video, we’re going to take a look at the GB Pound as we could see a short opportunity coming into the market. We were looking at the GB Pound this week because the strength meter suggested that the GB Pound bounced from the key highs.

Strength Meter

We can see here that the GB Pound was at that plus six areas, starting to drop through the market. The US Dollar has flatlined, it’s a little bit neutral, nothing going on here too much. But if we were expecting the GBPound weakness to drop and continue this week, we could see a continuation of the GBP/USD price.

Daily timeframe

If we take a look at the structure of the market and the daily timeframe, we can see that the price is making lower lows and lower highs.

The only concern I have is that the price closed back up towards 1.4. If we were going to see a nice trending environment, I wouldn’t expect to see that. So, there’s a slight risk to the downside because of that close.

Four-hour timeframe

If we take a look at the four-hour timeframe, the price is not in the downtrend yet. We saw a continuation; so we had consolidation, higher high, higher low, then the price then rallied up.

Fibonacci tool

Now, I used a Fibonacci tool, and I’ve gone from the swing high down to the swing low; I’ve marked the 23.6 level.

The 23.6 is a very deep retracement level. I’d like to see if the price closes below the 23.6 level. I deem that the retracement has been too deep and that we’re likely to see a change of the trend from that point.

What I’m looking for is for the price to close below 23.6. If we get that close, and the level for us is around this 1.381 area. If we get that close below this, I think we could see further downside in the GB Pound prices. And if we don’t get that close and we see the price hover above this level then see take off again, we could see prices coming back up to that 1.4, which is not what I’m anticipating. I’m looking for GB Pound downside this week and see if that strength can start to lower.

1.3750 is a good target to have for this market. If I go and jump up into a weekly timeframe, it’s a nice level looking back in the past and recently here. I want to target 1.3750 on the move. However, we just need to be careful because we don’t have the trend trade opportunity just yet.

If we’re going to be more conservative, I’d wait for a break and close below these lows here and then look for the continuation down. But it’s on the radar; if we do get that close, then it’s something we can look at. If we don’t get that close, then the price is likely to trade back towards 1.4.

Thanks for watching this video update, and I’ll speak to you soon.

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