Ahead of today’s UK major economic events, GBP/USD has formed a head and shoulders pattern on its 1-hour time frame. The pair has also recently broken below an ascending trend line connecting the price lows then pulled up for a retest before heading back down.
For now, the pair is still stalling around the neckline of the chart formation, indicating indecision when it comes to establishing a new downtrend or resuming the climb. A break below the 1.6800 major psychological support could confirm the longer-term selloff. This could last by as much as 200 pips, which is the same height as the chart pattern.
Setting a sell stop below 1.6800 to catch the momentum in case the UK events turn out bearish for the pound and aiming for the 1.6600 level with a 100-pip stop could yield a 2:1 return on risk.
By Kate Curtis from Trader’s Way