The British pound is under pressure against the US dollar currency as sterling traders await the key risk events, which are the FOMC September policy decision and the Bank of England policy decision.
Weakness in global equity markets has caused sterling to sink because the British pound is closely linked with market sentiment. Furthermore, the US dollar and the Yen currencies have been during this latest equity pullback due to their safe haven demand.
The technicals surrounding the GBPUSD pair are hugely interesting now, not only is a potential triple bottom forming, but a massive triangle pattern is also starting to take shape across the lower time frame.
Interestingly, the technicals are very clear for sterling in the short-term. Simply put, the GBPUSD pair needs to bounce from the 1.3600 to 1.3580 support region to stop a price plunge towards the 1.3300 area.
Moreover, if bulls can defend the July low, close to the 1.3580 level, then a big bounce back towards the top of the GBPUSD pair’s short-term range, around the 1.3900 level, is very likely to happen.
According to the ActivTrader Market Sentiment tool shows that some 75 percent of traders remain bullish towards the GBUSD pair right now. This is a big an increase since last week, which is alarming considering the 150 plus point drop.
The bullish sentiment skew is still warning about further losses, so we may see a max pain trade in regard to early bulls taking place over the coming days. Watch out for a further squeeze lower if the sentiment extreme widens.
GBPUSD Short-term Technical Analysis
Looking at the four-hour time frame, the GBPUSD pair has formed a large triangle pattern, with the price needing to move past the 1.3620 level to break through key trendline support.
As stated earlier, the GBPUSD pair need to bounce from the 1.3600 area to avoid a nasty drop into a much lower price range. Should we see a big bounce happening then watch for a quick climb back towards the 1.3800 to 1.3900 region.
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GBPUSD Medium-term Technical Analysis
According to the daily time frame a massive, inverted head and shoulders pattern continues to play out, with the latest price pullback potentially helping to form a final right-hand shoulder.
Failure for GBPUSD bulls to defend the 1.3600 level over the next few days is likely to prompt a decline towards the1.3500 to 1.3300 area. Much will depend on what happens with the US dollar index between the 92.50 to 93.50 price range.
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