GBP/USD – Major Monthly H&S Pattern

GBP/USD – Major Monthly H&S Pattern

GBP/USD – Major Monthly H&S Pattern

We have been looking for sterling to break the bottom of its recent range against the U.S. dollar but we did not anticipate the move happening this week. However now that a new 4.5 almost 5 year low has been set, bounces in the currency pair could be shallower. We still believe that traders should have the opportunity to sell sterling between 1.47 and 1.48 in the coming week for an eventual move below 1.45 on the back of the U.K. election. Aside from U.S. data, U.K. inflation and employment numbers are also scheduled for release next week. While the PMIs reported mixed labor market activity with the rate of job creation accelerating in the service sector and slowing in manufacturing, inflationary pressures should remain weak.

Taking a look at the monthly chart of GBP/USD, there is a major head and shoulders pattern with a neckline around 1.45. If 1.45 breaks, there is no major support until the 2010 low of 1.4225. Near term resistance is at 1.48, the former breakdown zone. This can be seen more clearly on the daily chart.

Chart Of The Day

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