GBP/USD Forecast: Ascending triangle signals upward move, why it could be a fakeout
Premium|Take advantage of 50% OFF on your first month.
Start your subscription and get access to all our original articles.
You have reached your limit of 5 free articles for this month.
Get Premium without limits for only $9.99 for the first month
Access all our articles, insights, and analysts.
UNLOCK OFFER- GBP.USD has been unable to fully capitalize on data-related dollar weakness.
- High UK covid cases and Brexit concerns weigh on sterling.
- Thursday's four-hour chart is showing a bullish ascending pattern.
Is everything written in the charts? If so, GBP/USD is on the verge of a significant upside – technical analysis textbooks say that an ascending triangle is a bullish pattern. However, a cross-analysis with other currencies shows that sterling is lagging behind its peers in taking advantage of the dollar's decline.
GBP/USD Technical Analysis
Cable bottomed out in mid-August at 1.36 and is now battling 1.38. Along its way up, it had several dips forming an uptrend support line. The other side of the triangle is the 1.3785 level, which separated ranges early last month, before the crash. While that line has been breached in recent days, these upward moves look like a false breakout – a "fakeout."
At the time of writing, GBP/USD is still trading under the 200 Simple Moving Average on the four-hour chart and upside momentum is waning. On the other hand, it is holding above the 50 and 100 SMAs and that ascending triangle should send it higher.
Fundamentals can make a difference.
Everybody's up, sterling not so much
The dollar is on the decline – it received three blows. First came the Conference Board's weak Consumer Confidence on Tuesday, and then came ADP's poor jobs report on Wednesday, which showed an increase of only 374,000 private-sector positions. Economists expected over 600,000.
The greenback had not time to recover and Wednesday's second publication also failed to impress. While the headline ISM Manufacturing Purchasing Managers' Index beat estimates, the Employment component contracted. That implies a weak Nonfarm Payrolls report on Friday and lower chances of the Federal Reserve tapering its bond-buying scheme.
The prospects of seeing more greenbacks coming out of the printing presses send the dollar plunging, with impressive recoveries in commodity currencies and EUR/USD hitting the highest in a month. GBP/USD hardly budged.
Why is the pound behind? The UK reported some 35,000 new COVID-19 cases on Wednesday and concerns about Brexit-related shortages is also weighing on sentiment. Even if these developments do not tell the whole story, one thing is clear – sterling is exposing its weakness.
Will the official US jobs report necessarily be a disaster? No. ADP's figures and the NFP have been going in different directions and the manufacturing sector is small. Perhaps the services sector is doing better. If the dollar eventually recovers, GBP/USD would seem to be the biggest victim.
Overall, if GBP/USD does not climb soon, it may opt to fall out of the triangle.
- GBP.USD has been unable to fully capitalize on data-related dollar weakness.
- High UK covid cases and Brexit concerns weigh on sterling.
- Thursday's four-hour chart is showing a bullish ascending pattern.
Is everything written in the charts? If so, GBP/USD is on the verge of a significant upside – technical analysis textbooks say that an ascending triangle is a bullish pattern. However, a cross-analysis with other currencies shows that sterling is lagging behind its peers in taking advantage of the dollar's decline.
GBP/USD Technical Analysis
Cable bottomed out in mid-August at 1.36 and is now battling 1.38. Along its way up, it had several dips forming an uptrend support line. The other side of the triangle is the 1.3785 level, which separated ranges early last month, before the crash. While that line has been breached in recent days, these upward moves look like a false breakout – a "fakeout."
At the time of writing, GBP/USD is still trading under the 200 Simple Moving Average on the four-hour chart and upside momentum is waning. On the other hand, it is holding above the 50 and 100 SMAs and that ascending triangle should send it higher.
Fundamentals can make a difference.
Everybody's up, sterling not so much
The dollar is on the decline – it received three blows. First came the Conference Board's weak Consumer Confidence on Tuesday, and then came ADP's poor jobs report on Wednesday, which showed an increase of only 374,000 private-sector positions. Economists expected over 600,000.
The greenback had not time to recover and Wednesday's second publication also failed to impress. While the headline ISM Manufacturing Purchasing Managers' Index beat estimates, the Employment component contracted. That implies a weak Nonfarm Payrolls report on Friday and lower chances of the Federal Reserve tapering its bond-buying scheme.
The prospects of seeing more greenbacks coming out of the printing presses send the dollar plunging, with impressive recoveries in commodity currencies and EUR/USD hitting the highest in a month. GBP/USD hardly budged.
Why is the pound behind? The UK reported some 35,000 new COVID-19 cases on Wednesday and concerns about Brexit-related shortages is also weighing on sentiment. Even if these developments do not tell the whole story, one thing is clear – sterling is exposing its weakness.
Will the official US jobs report necessarily be a disaster? No. ADP's figures and the NFP have been going in different directions and the manufacturing sector is small. Perhaps the services sector is doing better. If the dollar eventually recovers, GBP/USD would seem to be the biggest victim.
Overall, if GBP/USD does not climb soon, it may opt to fall out of the triangle.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.