The strong sell-off we saw at the end of last week in GBP/USD has caused many to call a near-term top in the pair and there seems to be a good deal of evidence to support this theory.Last week’s weekly candle is certainly strongly bearish, a powerful rejection of a significant resistance zone. The pair is higher this week however as the Pound, one of the strongest currencies this year, is not willing to go down without a fight.
There is significant event risk surrounding GBP/USD and the rest of the Pound pairs on Wednesday and Thursday of this week as monthly Manufacturing Production numbers and the NIESR GDP estimate for the UK are due out on Wednesday and the Bank of England is scheduled to announce their rate decision on Thursday. This event risk comes at a critical time for the Pound as GBP/USD maybe attempting to form a head and shoulders top, best seen on the four hour or daily chart. The neckline sits at roughly 1.60, and a breach of this level should open up a move down to 1.58. Until that point, we may see continued sideways trading in GBP/USD.
Written by: Liam McMahon, Currency Strategist – GlobalFxClub.com