- The failed breakout on GBP/USD's daily chart is painting a bearish picture.
- The daily chart also shows an impending golden cross, a bullish development.
- The latter is a lagging indicator and often traps buyers on the wrong side of the market.
GBP/USD's daily chart is reporting conflicting technical signals.
To start with, the pair fell 0.58% on Friday, invalidating a bull flag breakout - a continuation pattern - confirmed on Nov. 19. A failed breakout is widely considered a powerful bearish signal.
Even so, some technical traders may be reluctant to sell, as the 50-day and 200-day moving averages look set to produce a golden crossover in the next couple of days. A golden cross is a sign of long-term bull market, according to technical analysis theory.
In reality, however, it is a lagging indicator and often marks interim tops. Hence, the failed flag breakout takes precedence over the impending golden cross. Put simply, the probability of the pair falling to levels below 1.28 is high. Currently, GBP/USD is trading at 1.2846.
Daily chart
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Trend: Bearish
Technical levels
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