Continuation Pattern?

The GBPUSD pair started the day with a bullish tone. As we get closer to the FOMC minutes tomorrow, the USD continues to trade with an offered tone across the FX dashboard.

In fact, the weak dollar is the main theme dominating financial markets recently. It is literally losing ground against developed countries currencies – GBP, EUR, CAD, AUD, CHF, JPY, and sits and months low. Only against emerging market currencies, like the Turkish Lira, was the USD able to gain ground. And even in this case, the internal problems in the country made investors turning their back on the TRY.

In other words, the rally on the GBPUSD pair, that trades now well above the 1.31 mark, has nothing to do with the pound. And everything to do with the USD.

Since the pandemic started, the Fed set in motion various mechanisms to push the dollar lower. First, it lowered the federal funds rate close to zero. Second, it restarted the quantitative easing program. Third, it opened and kept open USD swap lines with other major central banks in the world. Fourth, it expanded its lending facilities in new areas, making it possible for businesses to apply for cheap loans, should they meet the conditions. On top of that, the fiscal stimulus in the United States exceeded anything else seen in the world.

As such, the rally on the GBPUSD pair is caused by the weak dollar. And nothing else.

GBPUSD Technical analysis

GBPUSD sits at crossroads. On the one hand, bulls may argue that the price action here resembles a bullish flag. Or, a triangle as a continuation pattern. In this case, going long with a stop-loss at 1.30 and targeting 1.35 makes sense.

But bears point to a possible triple top in the makings. If that is the case, a move below 1.30 should trigger a short trade for 1.27 area and a stop loss order at 1.3150.