Looking at the Monthly chart this pair has overshot the previous highs of 1995 and then fell back, getting stuck in a Pennant shape over the last year.
According to
Stockcharts.com...
Quote:
Flags and Pennants are short-term continuation patterns that mark a small consolidation before the previous move resumes. These patterns are usually preceded by a sharp advance or decline with heavy volume, and mark a mid-point of the move.
It may seem odd to think of this as a short term pattern but it is only 16 candles long.
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The weekly shows the Pennant in more detail. (The lilac line at 0.89030 indicates the area of the previous high, not an exact level.)
I think we have very plausible support and resistance lines and whether you see this as a Pennant or a triangle we are in the area that a breakout should occur if it is going to.
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The Daily doesn't show any signs of an impending breakout, but I'd hardly expect it to on the very day I start looking at this seriously.
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Why do I think that this is important? This will either break out significantly or drift out into a range. Recent news reports in the UK have discussed critical reports from the EU parliament regarding the UK deficit and plans to bring it down. With an election looming there is plenty of potential for GBP to weaken significantly.
If this breaks out to continue the uptrend there will be plenty of scope for profit as the previous leg was around 2000 pips.
Opinions welcome
Michael
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