GBP/USD Massive Head and Shoulders Points to More Weakness

Summary:

GBP/USD forms a head and shoulders patttern and the price tries to break the neckline currently. A decisive move lower should trigger more weakness.

The GBP/USD pair keeps pressuring the neckline of a head and shoulders pattern, in a move that does not bode well for cable’s bulls. A break and close below the neckline on a daily basis puts further pressure on the pair as short-sellers will push it toward the measured move.

The price action in the GBP/USD pair this week was strange, to say the least. The pair declined on overall dollar weakness generated by inflation in the United States that exceeded expectations.

While the EUR/USD or AUD/USD traded with a bid tone, cable failed to find buyers. The EUR/GBP rise did not help either, as the cross broke a bearish trendline and now forms a pennant, suggesting further continuation.

There is one market that likes the weakness in the pound – the stock market. As such, FTSE100 is trading above 7,000 points, a staggering level considering Brexit and all.

GBP/USD Technical Analysis

The technical picture is pretty straightforward and the only thing that may be counterintuitive is the pattern’s visibility. It is literally impossible to ignore such a pattern, but it does not mean that it will work.

Bears may want to wait for a daily close below the neckline and, ideally, below the support area from where the market bounced twice already. Such a move would be bearish and opens the gates for the measured move, seen at 1.32 and beyond.