On its 1-hour time frame, GBP/USD is trending lower, after forming a double top reversal pattern on its 4-hour chart earlier this week. The pair has since broken below the neckline around 1.6350, confirming the potential selloff.
Comments from BOE Governor Carney saying that QE is about to end have lifted the pair but it appears to be trading below a falling trend line. The pair could pull up to the trend line resistance around the 1.6300 major psychological level before resuming its drop. Stochastic is still climbing out of the oversold region indicating a quick rally.
Be mindful though that the FOMC statement is coming up and a decision to taper could send this pair much lower. Shorting at 1.6300 with a stop above 1.6350 and a target of 1.6000 could yield a 6:1 return on risk. Make sure to adjust your exposure prior to today’s major events though.
By Kate Curtis from Trader’s Way