The GBP/USD seems to be on the way to a short-term correction if the picture on the 4-hour chart is anything to go by. However, the GBP/USD still retains upwards bias on the strength of its vaccination campaign, reopening of the economy and the UK’s economic outlook.
Bond yields continued to rise on Thursday, but the USD got some late demand after upbeat Durable Goods orders. The 10-year UK bond yields are rising as well, and nearly in tandem with those of the US. Central bank chiefs on both sides have also been silent on these moves. These two factors have rendered the pair a bit insulated from the action in the bond markets.
The latest moves are therefore more technical in nature as traders may be looking to bank some profits from the recent surge in the pair.
Technical Levels to Watch
The 4-hour chart for the GBP/USD reveals some interesting key levels. The double top pattern in which the 2nd top is lower than the first seems to suggest that the uptrend may have stalled temporarily. This is confirmed by the failure swing pattern on the RSI. Price is now testing the support which serves as the potential neckline at 1.40986. A breakdown of this level confirms the double top pattern, and opens the door towards downside targets at 1.40486 and 1.39831, as the pair seeks to complete the projected measured move for the pattern.
On the flip side, a bounce on this level allows the pair to aim for the 1.41770 top, with 1.42319 and 1.43537 (Jan/April 2018 weekly double top) serving as the additional targets to the north. If the price stalls at or below the 1.41770, this may allow for a retest of the neckline in an attempt to form a triple top. However, a push above 1.42319 negates the pattern and allows the uptrend to resume.
GBP/USD 4-hour Chart