Today I’m going to share a possible fakeout developing on the GBPUSD daily time frame.
We’ll discuss what needs to occur to confirm the pattern, and some key levels to watch next week.
I’ll also provide an update on the US Dollar Index (DXY).
Watch the video below and scroll down for the annotated charts and analysis.
GBPUSD could be setting up for a correction next week following today’s failure to hold above the 1.2720 handle.
The pound closed above the level on Thursday following dovish comments from Fed Chair Jerome Powell.
However, market participants may have gotten ahead of themselves.
So far today, the DXY is testing 102.60 resistance after bouncing from 102.00 support.
A reclaim of the 102.60 area today or next week would imply dollar strength, or weakness from pairs like GBPUSD.
While the jury is still out on the dollar index, the pound’s failure at 1.2720 looks relatively bearish for next week.
Fakeouts like this tend to trigger extended moves in the opposite direction.
For GBPUSD, that could mean a retest of 1.2550 support and possibly the mid-range near 1.2380.
Alternatively, if GBPUSD closes back above 1.2720 on the daily time frame next week, it would invalidate the bearish idea and expose 1.2800.
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