The GBPUSD continued to gain ground following the impressive April 18th rally. But the manner in which the pound carved new eight-month highs was of concern, especially to those who are familiar with sloping flag patterns.
Impulsive and corrective moves characterize a healthy pullback, and more often than not those corrections move against the grain and last for several days if not weeks. This is what gives a market that natural ebb and flow we’re used to as traders.
What’s unique about the recent GBPUSD rally is that there was no correction following the move on April 18th. Sure, the pair sold off slightly the next day, but an actual correction to help reset momentum never materialized.
This is when a pattern like the upward sloping flag in the chart below comes into play. Notice how the pair drifted higher over time rather than pulling back in a series of lower highs and lower lows.
Last week’s break of channel support suggests more losses are in store for the GBPUSD. On top of that, buyers also surrendered the 1.2860 handle, making it a prime target for a retest as new resistance. Key support comes in at Friday’s low of 1.2770 followed by 1.2670.
Source: Daily Price Action
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