GBPUSD has formed lower highs and higher lows recently, creating a symmetrical triangle pattern on its 1-hour time frame. Price is approaching the peak of the formation so a breakout could take place soon. The chart pattern spans around 200 pips so the resulting breakout could be of the same height.
The moving averages are oscillating to reflect consolidation but the 100 SMA is currently below the longer-term 200 SMA to show that the path of least resistance is to the downside. Stochastic is also on the move down from the overbought region to signal a pickup in selling pressure.
The US government just signed the tax reform package, which is expected to be positive for business investment, consumer spending, and overall growth. Meanwhile, the EU also signed off on Brexit directives that would include a transition period until the end of 2020.
With that, both currencies are able to stay strong on a more positive outlook for the year ahead. The lack of other market releases for the week could also keep the consolidation in play.
Only the CB consumer confidence index and the pending home sales report are due from the US today, and both are expected to show strong gains. For one, the US housing sector has been on a good run for the past month while optimism could pick up in reaction to tax reform.