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Article / 03 August 2016 at 14:30 GMT

GBPUSD set for a breakout or a new low?

Technical Analyst / Saxo Bank
  • After Brexit, GBPUSD has been trading in an ever-narrowing triangle
  • On an even shorter timeframe. GBPUSD has just broken bullish 
  • BoE could break sideways cable trade tomorrow
Bank of England
What does the Old Lady of Threadneedle Street 
have up her sleeve for tomorrow? Photo: iStock 

By Kim Cramer-Larsson

GBPUSD has been trading in an ever-more-constricted band after the Brexit turmoil, forming a triangle-like pattern best illustrated on the four-hour chart (thick blue lines), but of course also visible on the daily. 

But let's start by having a look whats going on from a more constrained perspective. On the even shorter timeframe, it formed another ascending triangle (purple lines) and has just broken bullish out of testing the upper horizontal trendline on the upside. 

A move towards the longer-term falling trendline (blue line) is likely with in the next 24 hours.  

GBPUSD 4 hrs

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Source: Saxo Bank

If GBPUSD fails to break the longer-term falling trendline in the triangle pattern on the daily chart and can't stay above the short-term support line from the ascending triangle detected on the four-hour chart, the lower rising trendline in the daily triangle will be tested.

A break of that will very likely lead to a test of the post-Brexit low at around 1.28. There was no divergence on the RSI at the trough below 1.30 in July, indicating that we could get a new low.   

On the other hand, if cable can stay above the intraday support at around 1.33 followed by a test and a bullish break of the falling trendline on the daily chart, the 1.3650 level is in play which is the 38.2 Fibonacci retracement of the massive selloff on back of the Brexit referendum. 

Source: Saxo Bank

Maybe the Bank of England will announce a decision tomorrow that can take GBPUSD out of its more or less sideways (in the bigger picture) movement.

— Edited by Clemens Bomsdorf

Kim Cramer-Larsson is a technical analyst at Saxo Bank
Kim Cramer Larsson Kim Cramer Larsson
GBPUSD testing lower rising support in triangle pattern


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