The Great Britain pound versus the Canadian dollar currency pair set the depreciation into motion. Do the bulls still have any chances?
The confirmation of the 1.5936 support level started a strong bullish movement, one that extended until the level of 1.7811. After almost reaching the level, the price retraced under 1.7499 and confirmed it, at the start of February, as resistance.
This confirmation, alongside with the highs of 1.7305 and 1.7323, respectively, resembles a head and shoulders tops chart pattern. The fact that it is only a look-alike, and not an actual head and shoulders tops, is due to the right-side shoulder — in a genuine H&S tops pattern, the right-side one does not extend higher than the left-side one. Hence, because the right-side shoulder peaks at 1.7323 and the left-side one at 1.7305, the pattern is similar to a head and shoulders tops, but it is not a veritable one.
However, despite not being an actual H&S, it performed beautifully, as the price pierced the level of 1.7160 — which would have been the neck-line of the chart pattern.
The fact that the price confirmed in a very volatile way two important levels, 1.7811 and 1.7499, respectively, points to a bearish profile, a profile to which the H&S replica adds more weight.
As a consequence, as long as the 1.7160 level guards its role as a resistance, further depreciation may be seen. In one scenario, the price could retrace towards the 1.7160 level, to confirm it as resistance. In another scenario, it could simply continue the march towards lower prices, as an effect of the strong bearish optimism.
For both scenarios, the aim is the 1.6986 support level. Only if 1.7160 turns to support, then the situation would be rendered neutral.
The price oscillates under 1.7130. Just as for the higher timeframe, the price could retrace towards 1.7130. In this event, two main possibilities can materialize. The first one does not allow the price to go beyond the level, resulting in a confirmation of 1.7130 as resistance.
On the other hand, the second one does allow the price to get above 1.7130, knowing that the descending trendline would cause the price to stall, get back beneath 1.7130, and confirm the level as resistance.
However, the price could also print a short-term consolidation phase, such as a pennant or flag. These are actual continuation patterns.
So, all these scenarios target the 1.6959 support level. Only if the descending trendline is pierced and invalidated, then the situation may turn neutral.
Levels to keep an eye on:
D1: 1.7160 1.6986
H4: 1.7130 1.6959
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