Easing lockdown restrictions in the U.K. got me looking at the major pound pairs.
Can GBP/USD still extend its gains when it’s sooo close to a double top formation?
Here’s what I’m looking at:
In case you missed it, British Prime Minister Boris Johnson has eased lockdown restrictions starting May 17. Indoor hospitality is back, as well as some non-essential businesses. They can even “hug with caution” over there!
The easing restrictions and lower chances of another Scottish referendum got me looking into buying GBP/USD, which has already rocketed by 100 pips since yesterday. Can the bulls squeeze in more gains in the next few days?If traders continue to price in accelerated economic recovery in the U.K., then GBP/USD could revisit the 1.4200 and 1.4300 previous highs. That’s still a 100 to 200-pip opportunity if I’m vigilant enough to keep my eyes peeled for the first signs of reversal!
But Cable is now about 100 pips away from the 1.4200 highs seen in February. More importantly, it’s also 200 pips or so away from the 1.4300 mark that had served as the “top” in a Double Top pattern back in 2018.
This week’s anti-risk, pro-dollar themes can work in favor of another Double Top setup.
MarketMilk also tells me that a big drop is still within the GBP/USD’s average volatility for May.
If there aren’t enough buyers around GBP/USD’s current levels, then I’ll consider shorting near this week’s highs and then aim for the Double Top “neckline” near 1.3750. I’ll make sure to look for momentum in the shorter time frames before I enter a short, though, because it would suck if I tried (and failed!) to trade a market top!
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