FX.co ★ GBP/USD intraday technical levels and trading recommendations for October 21, 2013

Daily overview:

Daily closure above 1.5720 (the highest level in August) enhanced further bullish pressure to be applied so that the bulls could step above 1.5760 (the highest level in June).

The previous bullish swing targeted 100% Fibonacci Expansion level. However, the current bullish swing was strong enough to bypass this level when the pair stepped above 1.6035 recording a daily high at 1.6262 which is 70 pips higher than 127.2% Fibonacci Expansion Level. However, most of the daily gains were lost resulting in an Inverted Hammer daily candlestick during the 1st week in October.

A wider than expected trade deficit along with dismal UK industrial and manufacturing production data enhanced bearish pressure on the pair last week to reach a weekly low around 1.5895.

Price fixation above 1.5950 enabled the bulls to reach 1.6035, the nearest supply level followed by retesting of 127.2% Fibonacci Expansion around 1.6220 (the right shoulder zone).

The cable is probably establishing a bearish Head-and-Shoulders pattern with right shoulder located around 1.6150. That is why, a valid sell entry is suggested either at the current prices or after breakdown of the neck-line around 1.5930 ( for conservative traders ) to have an estimated target around 1.5720 with SL as daily closure above 1.6250.

Breakthrough above 1.6220 which isn't expected will lead to another bullish swing towards 1.6285 again (141.4% Fibo Expansion), where intraday resistance should be applied.