The GBPUSD is heading toward a critical support level.
I’ve mentioned the May trend line a few times in recent weeks.
It’s the one level that has kept this uptrend intact.
That means it’s the one level that, if broken, could send the GBPUSD lower.
And based on the last few weeks of price action, a break lower isn’t far fetched.
The breakdown in early September appears to have inflicted structural damage to the pound’s upward trajectory.
If that was an impulsive move, it means the latest bounce that began in late September is the correction.
That could lead to further losses.
However, one thing to keep in mind is what’s happening on the monthly chart.
I’ve talked about this twenty-year falling wedge pattern before, but it’s still one to watch, in my opinion.
The pattern above is suggestive of a longer term bullish view.
So, even though we could see GBPUSD move lower in the short term, I do think we’ll see the pound higher in 2021.
That is, if the falling wedge above plays out as anticipated.
In the short term, though, I do think GBPUSD could pull back, especially when we factor in last month’s bearish engulfing candle.
But as I’ve mentioned before, it’s going to take a daily close below the May trend line to expose lower levels.
Key support below the trend line includes 1.2670 and 1.2520.
Disclosure: I hold a GBPUSD short position.
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