GBP/USD Forming a Short-term Head and Shoulders Pattern

0
111
GBP/USD Forming a Short-term Head and Shoulders Pattern

The greenback fell across the board last week after a slew of soft US data. The GBP/USD was able to bounce of up the low on the year at 1.4564 up to 1.5053. There was decent CPI data, and better than expected UM economic sentiment data on Friday, which helped cap cable’s gains at 1.5053.

GBP/USD 1H Chart 4/20
gbpusd 1h chart 4/20
(click to enlarge)

The 1H chart shows the bearish reaction on Friday. It also shows the subsequent failure to push back towards 1.5050. Instead price action created the right shoulder to a head and shoulder’s pattern.

As we start a new week, price action attempted but failed to push above the shoulder and instead fell below the neckline, taking out a rising trendline with it as well. Meanwhile, the RSI which showed persistent bullish momentum in the short-term last week, has fallen below 40, which reflects loss of the prevailing bullish momentum.

The intra-session or near-term bearish outlook would be towards the 1.48-1.4812 support/resistance area. However if the market is not ready and pulls back, let’s watch the 1.4950 area for resistance. If GBP/USD holds under 1.4950 it would confirm a price top and add weight to the bearish scenario first towards 1.48-1.4812, then towards a support/resistance pivot at 1.47 before opening up the 1.4564 low on the year.

GBP/USD 4H Chart 4/20
gbpusd 4h chart 4/20
(click to enlarge)

The 4H chart puts the levels discussed above in more perspective. We can see that price essentially cracked a common resistance around 1.50 but immediately retreated last Friday. Also note that the noted 1.48-1.4812 area contains a common support and where the 100-, and 50-period SMAs reside. A break below these moving averages would essentially revive the bearish bias. Also, the 1.47 pivot goes back to March. If price falls below 1.47 and the RSI below 40, we would already be in a bearish continuation scenario.

Previous Post by Author: EUR/USD Showing Signs of Topping

SHARE
Previous articleHong Kong to Hold Inside Bitcoins on May 14-15, 2015
Next articleCryptocurrency Trading News: Bitcoin Continues in Tight Range
Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.