Over the last 24 hours, GBPUSD has managed to climb back above the 1.5110 level, an area that had previously acted as support since May but was broken during last Friday’s session. This reversal indicates a level of demand that could push the pair higher in the coming days.
However, there is a larger pattern at work that could prevent the bulls from seeing any meaningful gains. The ascending channel you see in the chart below extends off of the 2015 low in April with an upper level that began in late February.
This price structure is compliments of a Daily Price Action member who noticed it first. As you can see, the seven-month pattern broke down during last Thursday’s dovish remarks out of the BoE.
The only thing missing here would have been another retest of channel support prior to the breakdown. Although not as favorable without it, a missing link such as this is easily cured with the right price action signal upon a retest of the level as new resistance.
With this pattern in mind, any gains over the coming sessions could be limited as the pair is quickly approaching confluent resistance at 1.5240. This is the intersection of former channel support and the October 29th low.
This idea of further weakness will remain intact as long as the pair remains below 1.5240 on a closing basis. Key support comes in at 1.4980 and 1.4740.