GBP/USD Technical Outlook
- Cable is currently trading at the neckline of an inverse H&S pattern
- If a breakout occurs could lead to a sharp rally
- Resistance is resistance, though, until broken
GBP/USD Technical Analysis: At Cross-roads of Potentially Bullish Pattern
GBP/USD is trading potentially critical crossroads as it sits just beneath the neckline of an inverse head-and-shoulders pattern. Yesterday’s lower than expected US CPI figures gave cable the shot in the arm it needed to test this important threshold.
If it breaks and we see price cross above 12295 a sizable breakout could get underway as the pattern has been in development for a good two months. The depth of the pattern suggests we could see price trade as high as the Sep ’20 swing-low at 12669.
We do need to see a daily close above noted resistance first, however, before the pattern is valid. A failure to do-so could set off a move to the downside. Often times these patterns are noted at this stage (or earlier) and then when price turns down before breaking the neckline the pattern gets discounted as “not working”. But to be valid the neckline must be broken first.
On a breakout the first level to watch is 12405, followed by the September 2020 swing low at 12669. Price could stall ahead of these levels, but these are currently the only visible horizontal price levels to watch at this juncture.
If we see price fail to climb firmly above the neckline, then watch for a developing trend-line off the lows to keep cable bid. If it fails to do-so, then the first price level to watch clocks in at 120029, followed by the low at 11764.
GBP/USD Daily Chart
GBPUSD Charts by TradingView
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—Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX