Putting short-term and long-term charts in perspective
Looking at the monthly chart above we can see that the instrument reversed earlier from a 42 level and reached the strong horizontal resistance and almost 25% of the Fibonacci retracement of the 2008-2016 swing down. This 75 level has proved to be a strong resistance which has led to almost $23 pullback into the strong 42-52 long-term support zone.
For some traders which are not using the top-down trading analysis, the problem is arising when they look at the weekly chart and they are intrigued by the latest test of the 52 level which is the top of the mentioned long-term support zone. Some see this as a bottom for an uptrend continuation. A daily close below the 50 will completely invalidate the upside swing and it could lead to a greater downside extension. To add more to this view of a bounce is that 75% -Fibonacci retracement of the latest July 2017-July 2018 swing upside.
A Daily chart is revealing the bounce candle formation and traders should be looking for the long trades from here. Your stops should be below the 50 level. This will be then a long trade with the $2.5 of the risk comparing to potential $10 reward per contract which is excellent for trading. In case of the daily close below the 50 level will open the high probability short trade entries.
The main conclusion of this technical analysis insight is that in the medium-term GBPUSD will have a higher probability to swing higher and the invalidation of this swing higher will come only on a daily close below the 1.2660 level.
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