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GBP/USD latest: head-and-shoulders top points to falls ahead

The hourly GBP/USD chart shows a head-and-shoulders pattern that technical analysis suggests will lead to a near-term move to the downside before further gains.

Pound Source: Bloomberg

GBP price, news and analysis

  • A head-and-shoulders top pattern on the GBP/USD chart suggests near-term weakness in the pair
  • In the longer term, the pattern remains in an upward sloping channel that implies this weakness will be temporary and limited

Downside risk near term for GBP/USD

A head-and-shoulders top formation has formed on the hourly GBP/USD chart, which technical analysis suggests will lead to a near-term move to the downside. As the chart below shows, the price has now broken below the neckline of the pattern and could fall as far as the distance between the top of the head and the neckline, giving a target around $1.355.

GBP/USD hourly price chart Source: IG charts
GBP/USD hourly price chart Source: IG charts

Note though that there is trendline support around $1.36 and then at $1.352 from the low touched on 18 January. Moreover, the price is already recovering so the break lower may prove to have been a false one, and GBP/USD remains in a longer-term upward-sloping channel.

Any further weakness should therefore be temporary and limited, with the major trend still to the upside.

This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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