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GBP/USD : Breakout Imminent

(Wed, 27 May 2020). GBP/USD continues to trade within a symmetrical triangle pattern on the charts and will likely break out shortly. However, it is unclear yet whether that will be to the upside or the downside, suggesting traders need close stops to avoid possible losses.

 

GBP/USD CLOSE TO BREAKOUT

GBP/USD continues to trade within a symmetrical triangle pattern on the charts that has been in place since the recent high at 1.32 was touched on March 9. Since then it has dropped to around 1.26 but is up from a low at 1.1410 reached on March 19. The key question now is therefore whether the breakout will be higher or lower. Symmetrical triangles are seen generally as continuation patterns so, as the previous trend was downwards, a break to the downside is more likely.

However, that prior downtrend was very modest compared to the moves since early March so the downside break is far from assured. That suggests traders who think the next move will be lower should place a tight stop just above the current price. Those expecting the break to be higher should place the stop just below the current price. From a fundamental perspective, eyes will be focused increasingly on the ongoing UK-EU Brexit negotiations. Meanwhile, a controversy over UK Prime Minister Boris Johnson’s aide Dominic Cummings has yet to affect GBP despite a junior minister having resigned in protest after Cummings remained in place despite arguments over whether or not he broke coronavirus lockdown rules.

Globally, more stimulus and an easing of lockdown restrictions continue to support risk-on currencies like GBP despite concerns over US-China relations and protests in Hong Kong over proposed new security laws.

 

 

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