Market Update: GBPUSD Downtrend Underway?
Hi traders, today we are looking at the GBPUSD from the daily chart as sellers look to be setting up an extension on the current newly formed downtrend.
Last week we did see some buyer rejection which for a time did look like we may see a new push higher by buyers. This has quickly been cut down by sellers as USD strength continues to present as a driving factor against risk currencies.
Looking at price we can see the clear trend break which was followed up by two lower highs. We can also look back further as we can see a leading pattern that could have forewarned that weakness was coming. That pattern is a double top with a range distribution around the second point. These patterns always look fantastic after the fact, but harder to accept mentally when you’ve been watching oneway traffic for an extended period of time. With today’s 2nd LL on the back of the two LH’s we can now see the normal pattern of a trend moving lower.
Is this confirmation of a new downtrend? Signs are building but we would want to see price continue to run below its fast trend and the medium-term downtrend to maintain this idea. We also want to see the price continue to set new LL and LH showing normal downtrend behaviour. Any break and close above the fast trend at this stage could be seen as a small warning. I am mentioning this as the UK continues to see inflation pressure and rate rise talk could cut down short-term seller momentum.
This is also true on the USD side, Fed rate and tapering talk could also amplify USD strength.