A double top pattern has formed on GBP/USD’s 4-hour time frame, indicating that the pair’s rally might soon be over. The pair seems to be testing the neckline around the 1.6300 major psychological support.
The pattern is roughly 100 pips in height, which suggests that the breakdown might be at least of the same size. Shorting at market with a 50-pip stop and a 100-pip target is a 2:1 return on risk.
Take note though that stochastic is already in the oversold region, which suggests that a bounce might take place first. If you’re aiming for a conservative entry, you could wait for a quick retracement to the 1.6350 area before shorting.
By Kate Curtis from Trader’s Way