The GBPUSD has a hard time above 1.30. Effectively, it did nothing but consolidating throughout August, with little follow-through both for bears and bulls.
On the one hand, the 1.30 level provides support and is key for future constructive price action. On the other hand, the pair seems to have put in place a double top at 1.3250, and that area must hold for any bearish scenario.
USD Still Sold as U.S. Equity Markets March Higher
One of the reasons why the GBPUSD trades with a bid tone up here comes from the other side of the Atlantic. More precisely, the M2 money supply in the United States increased so much that it explains the higher stocks, lower USD movement.
Yesterday, the S&P500 closed at a new all-time high, effectively erasing 2020 losses. Nasdaq100 already did that and continued higher, with the Dow Jones lagging – but getting closer to the highs.
In other words, the USD is sold on any bounce, and the selling comes from all directions. The GBPUSD pair, surprisingly, consolidates, instead of marching higher. This may be a signal that a potential reversal is in the cards, just ahead of the Jackson Hole Symposium.
GBPUSD Technical Picture
GBPUSD put a potential double top at the 1.3250 area. If that is the case and the market does not make any other attempt at the highs, the double top is enough for a short trade that respects the 1:2 risk-reward ratio.
Considering the consolidation seen on the left side of the double top, it may be that the pair is forming a head and shoulders pattern here. In this case, the 1.3250 area should still hold, but some more consolidation follows on the right side of the chart.
A short trade is a contrarian one, so the risk should be smaller than a usual trade. Bears might consider going short at the market with a stop-loss order at the 1.3250 area and targeting 1.2820 for the double top formation to be confirmed.