GBP/USD remains confined within a falling daily/hourly channel. A further swing lower is favoured from this region to test long-term trendline support, currently at 1.5170. We now seek a lower high for the resumption of weakness towards this target zone.

The channeling formation that we see in the daily timeframe is suggestive of a degree of exhaustion. We are also wary of the signal given by negative rates on short dated German sovereign debt (6 months and under). We would thus expect strong support near 1.5150, should this level be met, due to an expectation that EUR/GBP may be pressured to the downside, as Sterling may be favoured as a relative safe haven.

With this in mind, it is also noted that in the daily timeframe there is a head and shoulders pattern, with a neckline passing through 1.5297/1.5235. It is anticipated that if a break under this neck-line can be achieved, that it will lack momentum.

Daily Technical Report