GBP/USD peaked at 1.9845 on the daily charts on December 1 and had the potential for a flag pattern which when broken to the topside signaled a continuation pattern. However, the sideways action seen since the aforementioned peak suggests that this is indeed a top, at least for now.
Since December 1st last year the pair has been gradually easing, albeit in relatively tight ranges and has formed a flat to mildly bearish band/downchannel. The base of this comes in at 1.9400 and has been under pressure today. A break and close below this line would set price up for further weakness going forward. This morning's price action has also taken out the first fibo (38.2%) of the 1.8835/1.9845 climb at 1.9460 which leaves the path open for a deeper retracement to the 50% and 61.8% levels at 1.9340 and 1.9220 respectively.
Those playing the short side can use the latter as a target objective. Daily trend studies are ticking south after the slow stochs underwent a negative cross which generated a sell signal. In addition to this, Wednesday's price action was an outside bear day on the charts and the negative close again points to further weakness.
Looking further ahead, however, the underlying strength of the Pound and weakness of the Dollar looks set to continue once daily and weekly technical charts have worked out Cable overbought bias and a move to the key psychological level at 2.00 remains a possibility later in the year.
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