Time for a reversal on the GBPUSD?

GBP starts this week on a back foot still influenced by the weaker data from the British economy, which were published on Friday (Manufacturing Production). Although whole July is negative so far, the overall sentiment stays positive and we should start looking for important supports. In this analysis I will tell you why and where we can find them.

First of all that what the mid/long-term trend is. I know that if we consider Brexit, we are still very low, but if we consider bottom from the January this year, we are now 7 months older and 900 pips higher. In my opinion that is a fair description of an up trend. Another thing is that at the end of June we broke the upper line of the trend continuation pattern (wedge, blue lines), which activated a buy signal here. Currently we are in the another trend continuation pattern (flag, brown lines), which indicates that the current movement is just a correction and that we should aim north.

So where is the potential bottom for the current downswing? Well, how about now (orange area)? What we do have here is a lower line of the flag (support), recent upper line of the wedge (previously resistance, now support) and the 38,2% Fibonacci (support). So in one place we do have three potentially nice reversal points. One thing is missing here - the proper price action. What we are waiting for is the price respecting this level, so making a kind of a bullish reversal. Only the fact that we are here is not enough to go long. I want to see a hammer or a bullish engulfing here (or other bullish pattern). I want to see price bouncing from this level and aiming higher. I know, that if you will be waiting for that you can miss few pips but in the same time you gain certainty which is often priceless in trading. Once a reversal pattern and demand will be present, that will be an invitation to open a long position.

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