GBPUSD coils tighter into 1.300…..A breakout?

‘UK stands down,’ describes one newspapers after Brexit is delayed once more. October 2019 is now the new exit date.

However, none of the major Brexit issues was solved by this political can kicking. The WA agreement remains in a political limbo; the Irish backstop saw no new development. Investors are not impressed.

Look at GBPUSD. Prices remained stuck to the 1.300 baseline. The past few weeks saw this rate coil tightly into a ‘descending triangle’ pattern – whereby each pivot high is lower than the one before. Price volatility has subsided gradually, into a lateral support. Very often, a price stalemate leads to an explosive move later on. The question is, which direction?

For Sterling, this question is difficult to answer because of the country’s volatile political scene. But I would look to GBPUSD’s medium-term trend for clues. Right now it remains bullish due to the pattern of higher lows. (A similar pattern is observed for GBPEUR). Prices are also supported by the long-term trend indicator. Therefore, the rate’s balance remains – modestly – in favour of the bulls. A firm downside break of the psychological support at 1.300 is required to reverse the pattern.

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