Remember that Cable head and shoulders pattern we spotted a few days back?
The pair already fell through the neckline and appears ready for a retest before gaining traction on a reversal.
Check out these correction levels on the 4-hour time frame.
GBP/USD: 4-hour
GBP/USD Daily Forex Chart by TradingView
Sterling has been in selloff mode so far this week, as markets haven’t exactly been cheery about the framework for a trade deal between the U.S. and the EU announced over the weekend.
At the same time, traders are bracing for a bunch of top-tier U.S. catalysts, including the advanced GDP release, the FOMC decision, and NFP report.
Can these sustain a potential GBP/USD long-term downtrend?
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your fundie homework on the British pound and the U.S. dollar, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
Cable already broke through its head and shoulders neckline, suggesting that a selloff that’s the same height as the chart formation could follow. However, the pair also seems ready for a quick pullback to the area of interest spanned by the Fibonacci retracement levels.
The 61.8% Fib lines up with the 100 SMA dynamic resistance and pivot point level (1.3480) and could be the line in the sand for a bearish correction while the 38.2% level coincides with the broken neckline support near the 1.3400 major psychological mark.
If any of these are able to keep gains in check, look out for a continuation of the drop to S2 (1.3290) or to May lows closer to S3 (1.3180). On the other hand, a rally above the area of interest could invalidate the reversal pattern and take GBP/USD back up to R1 (1.3550) then R2 (1.3660).
Whichever bias you end up trading, don’t forget to practice proper risk management and stay aware of top-tier catalysts that could influence overall market sentiment.
Disclaimer:
Please be aware that the technical analysis content provided herein is for informational and educational purposes only. It should not be construed as trading advice or a suggestion of any specific directional bias. Technical analysis is just one aspect of a comprehensive trading strategy. The technical setups discussed are intended to highlight potential areas of interest that other traders may be observing. Ultimately, all trading decisions, risk management strategies, and their resulting outcomes are the sole responsibility of each individual trader. Please trade responsibly.
