GBPUSD has been closing higher for the past few days but it seems that the uptrend is just beginning. On the daily chart, price is breaking above the neckline of the an inverse head and shoulders pattern, potentially confirming that further gains are likely.
The chart formation’s neckline is around the 1.6000 major psychological level and a move past that point might seal the deal for a much longer-term climb. Take note that the chart pattern is around 1500 pips in height, which means that the resulting breakout could be of the same size.
RSI is heading north, suggesting that there’s enough bullish momentum to trigger an upside breakout. However, stochastic is already indicating overbought conditions, so a quick selloff might be seen. If so, a pullback to the 1.5500 area of interest might still be enough to keep the potential uptrend intact.
GBPUSD Forex Forecast
Last week, the UK released its spending, jobs, and inflation data. While the actual readings weren’t far beyond expectations, pound bulls rejoiced in the fact that the previous downtrends have been halted. In particular, core CPI marked its first monthly gain in five months while headline CPI confirmed that the UK economy is out of deflation.
Retail sales marked a mere 0.2% uptick while the claimant count change actually fell below consensus. Despite that, the pound still got a boost from much stronger than expected average earnings data, which suggested that consumers might increase their spending and take more advantage of lower price levels later on.
Apart from that, the BOE minutes suggested that some members are still leaning towards voting to hike interest rates possibly in the next meetings. In contrast, the FOMC statement turned out to be a disappointment since Fed Chairperson Yellen didn’t really confirm that they’d be ready to tighten in September.
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