I have drawn a descending trend line to identify the current trend and as you can see at the descending trend line we were can see price sell off. There are 4 places of price sell off marked in blue in the chart. All happened at the descending trend line which informs us that the down trend is still intact. The daily chart of the GBPUSD however shows that price is back at the 1.5975 – 1.6221 range and this maybe a change in price polarity (change to a strong GBP) OR a price retracement on a downtrend.
Scenario of price polarity change.
Price close above 1.6179 on daily chart
Scenario for price retracement on a downtrend.
Price fail to close above 1.6179 on daily chart
Short term view:
Looking at the hourly chart, price broke through 3 boxes on Friday alone. If you were in the trade congratulations. If you were not, I would think that it is risky to buy above 1.6031. For this example, think that the price is one big box of 1.5944 – 1.6031. Price sprinted off the blocks at 1.5944 and did not stop till it went to 1.6031. The price is like a 100 meters runner. At the sound of the starter gun, it sprinted off and hit the finishing line at 1.6031 and like all 100 meters runner they can never stop at the 100 meters mark. The running continues for about 10 meters more or so due to momentum. Likewise the price that we see. At the end of the 100 meters, the runner has spend all his energy and cannot run anymore at full speed. Now the 4 consecutive big bullish is the 100 meter runner.
Long distance runner on the other hand is different. they do not sprint but show consistent speed and this is reflected in small to medium sized price bars instead of big bullish bars.
I would only continue buying the GBPUSD if price are able to close strongly above the 1.6031 and my target would be the 1.6076.