**GBP/USD Forex Signal 14.01: Head and Shoulders Chart Pattern in Focus**
*Original Author: Crispus Nyaga. This article is based on insights from the original piece published on MENAFN.*
The GBP/USD currency pair, known as the “cable,” is firmly in the crosshairs of forex traders as the new trading week unfolds. With uncertainty swirling amid Brexit developments and US economic data, the pair has recently carved out notable technical patterns that warrant serious attention among market participants. This analysis will explore the current setup, covering the latest price action, underlying fundamentals, and the technical charts—highlighting the head and shoulders formation dominating traders’ perspectives.
## Latest GBP/USD Price Action Overview
– **Last Week’s Performance:** The cable started the previous week on a bullish note, surging toward the 1.3600 region before encountering resistance. By the end of the week, selling pressure weighed on the pair, pushing it back below 1.3500.
– **Current Price Region:** As of this report, GBP/USD is consolidating around the 1.3500 level, exhibiting sensitivity to both UK and US economic releases.
– **Intraday Volatility Drivers:** Market participants continue to react dynamically to fresh headlines related to Brexit trade negotiations and potential policy shifts from the US Federal Reserve.
## Key Fundamental Drivers Impacting GBP/USD
When interpreting the outlook for GBP/USD, it’s essential to weigh prominent macroeconomic and political forces.
### Brexit Uncertainty
– **Trade Talks:** Negotiations between the UK and EU remain a focal point. Any sign of progress or setback has the potential to spark significant volatility in the pair.
– **Future Relations:** Even after a formal deal, the exact terms of future UK-EU cooperation are unclear, generating caution among investors.
### Bank of England Monetary Policy
– **Interest Rate Decisions:** The Bank of England’s commitment to low rates and further potential easing influences sterling’s performance.
– **Quantitative Easing:** Any signals of increased asset purchases could pressure GBP further.
### US Dollar Dynamics
– **Federal Reserve Stance:** The Fed’s dovish messaging, with an emphasis on supporting growth, has intermittently weighed on the dollar. However, any hawkish shifts, such as tapering talk or inflation concerns, could revive USD strength.
– **US Data Releases:** Dollar direction is sensitive to key statistics, including jobs reports, inflation data, and GDP growth.
– **Safe Haven Demand:** Geopolitical events and concerns about global recovery often boost safe-haven flows to the dollar, suppressing cable upside.
## Technical Analysis: Head and Shoulders Pattern Emerges
A pivotal development in the GBP/USD technical landscape is the emergence of a head and shoulders pattern on the 4-hour chart. For traders versed in chart patterns, this formation is often regarded as a harbinger of trend reversals. Understanding its structure and implications is crucial.
### What is the Head and Shoulders Pattern?
– **Left Shoulder:** Initiated with a high followed by a minor pullback.
– **Head:** Forms as the price rallies further, creating a higher peak.
– **Right Shoulder:** A subsequent rally stalls at a lower high, mirroring the left shoulder.
– **Neckline:** The connecting support line at the base of the two troughs, representing a key breakdown level.
### GBP/USD Chart Breakdown
– The cable’s recent advance to near 1.3700 constituted the “head,” with earlier and later highs around 1.3500–1.3550 serving as the “shoulders.”
– The neckline support resides near the 1.3450 area.
– A confirmed breach and close below that neckline would signal potential for further downside, as the pattern completes.
### Implications of the Pattern
– **Bearish Signal:** The head and shoulders is widely considered a bearish reversal pattern when appearing after an extended uptrend.
– **Downside Projections:** Traditional technical
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