Is GBP/USD breaking out of a triangle on the 4-hour chart? Or are looking at a possible fakeout? Here’s what I’m looking at for this week’s forex watchlist!
As you can see on the chart below, Cable looks like it’s breaking above a falling trend line that had been holding since the start of the month.
What makes the “breakout” more interesting is that the pound can’t seem to find upside momentum, at least not enough to break the 1.2500 major psychological handle yet. Oh, and have I mentioned that the MaPs also lines up with the 100 SMA on the 4-hour chart? The cherry on top of the bulls’ headaches is stochastic chillin’ like a villain on the overbought area.
Fundamentally, it seems like the pound is doing pretty well against the dollar despite recent data misses from the U.K. Some of the strength might be due to downside pressure on EUR/GBP though it might also help that the U.K.’s House of Lords isn’t expected to block the U.K.’s exit from the EU (they could delay or make it more difficult, though).
Meanwhile, the dollar remains a wildcard for me at the moment. Trump has yet to announce his “phenomenal” tax plans and today’s FOMC meeting minutes is expected to be a tad less hawkish than the previous releases. Unless we see more catalysts for a dollar rally, then Greenback bulls could continue to take profits from their recent runs.
Of course, these doesn’t mean that the winds won’t blow in the opposite direction later today, tomorrow, or in the next couple of days. Rising tensions over the Brexit Bill’s second reading could eventually drag the pound and the Fed could maintain its hawkish stance while Trump announces his tax plans.
Since both the pound and the dollar seem to be trading on politics and sentiment at the moment, I’ll be watching this one closely to see if we’re looking at a breakout or a fakeout.
Shorting at current levels could make for a good trade if pound traders see a fakeout, while buying above the top WATR, PWH, and 1.2550 area of interest could also yield neat pips in case this IS an upside breakout after all.
What do you think? Which way will GBP/USD go?
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