GBP/USD Daily Price Forecast – Pound Consolidates Near May Lows

A Double Top Pattern is in Play for GBP/USD

A decline in GBP/USD on Friday below support at 1.2655 has activated a double top pattern in the pair. The pattern carries a target of 1.2545 which is roughly 35 pips from where the exchange rate was last seen trading.

The pattern should serve to keep pressure on the pair in the early week, ahead of several risk events that are scheduled from Wednesday onward. At the same time, the pair has already dropped about 75 pips since falling below the breakout point. So the risk to reward is not so great for playing the downside from these levels.

There are Several Important Economic Releases for GBP/USD This Week

The Fed meeting is an obvious one and stands to have a significant impact on the pair. In addition to it, the Bank of England will meet on Thursday and on Wednesday, the same day as the Fed meeting, UK inflation data will be released.

BOE Governor Carney is on the calendar to speak on Tuesday. He will be in a panel discussion at the ECB Forum taking place in Portugal. Often these type of events do not have a significant impact on the exchange rate.

Considering there is quite a bit of data in the second half of the week, I think GBP/USD volatility might slow over the next two sessions.

Technical Analysis

GBP/USD is seen holding above a support level that resides at 1.2580. This level held the pair highs on a 4-hour candle close basis in late May.

With the light economic candle, and as the risk to reward does not favor the short side from current levels, I think there is some potential for a bounce. However, looking at the downside momentum since Wednesday, looking for some upside looks to be a risky view.

On a 4-hour chart, I see overhead resistance just above the 1.2600 handle. If the pair gets above it, I would expect that it can recover further.

There is some further resistance at 1.2625 but the big level to watch for is 1.2655. This marks the breakout point of the mentioned double pattern. It doesn’t seem likely we get there today considering the downside momentum, but I do suspect there will be a lot of sellers waiting if we do.

To the downside, I see support at 1.2545. This level marks the measured move target for the double top pattern. If we get there today I’m speculating that there will be some profit taking and position squaring ahead of the major events later this week.

Bottom Line

• A double top pattern is in play with targets at 1.2545.
• The breakout point of this pattern is at 1.2645 and is expected to hold sellers.
• Volatility may slow with several risk events on the calendar in the second half of the week.