Position: Long GBP/USD
Entry: 1.2737
Initial Target: 1.3445 (+708-pips, September 6 high)
Stop: 1.2415 (-322-pips, trail below daily 13-EMA)
Reward/Risk Ratio: 708/333 = +2.20
GBPUSD looks to be forming a ‘triple bottom’ reversal pattern – a signal that the pair’s long prior downward trend is about to reverse, possibly reaching up to the previous reaction high.
Three bottoms can be better than one -- this pattern is relatively rare and is usually an extension to a double top. When it does occur it is usually formed at the end of a long trend. The triple bottom formation appears in the GBPUSD’s daily and weekly charts.
Chart 1: GBP/USD Weekly Timeframe (December 2015 to March 2017)
Looking at the weekly chart, the triple bottom would be confirmed if the pair breaks the ‘base’ around 1.2737 – the high of November 28 last year. If that’s broken, it will signal a bullish move to the first swing target around 1.3352, the high of August 29. If that’s cleared, an eventual return to pre-Brexit vote levels wouldn’t be so far-fetched. A further break above the September 6 high of 1.3445 could ultimately instigate a return to pre-referendum levels above 1.4500.
Chart 2: GBP/USD Daily Timeframe (June 2016 to March 2017)
--- Written by Oliver Morrison, Analyst
To contact Oliver, email him at oliver.morrison@ig.com
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