GBP/USD saw a break over hourly channel resistance yesterday, warning of a breakout. However, initial signs suggest that a false break may have taken place, warning of a return to the base of this channel structure, currently at 1.5170, very close to the location of long-term trend-line support from 1.3503.
The hourly channeling structure can also be seen in the daily timeframe and is suggestive of a degree of exhaustion. Coupled with continued negative rates on short dated German sovereign debt (6 months and under), we would expect strong support near 1.5150. Should this level be met, EUR/GBP may be pressured to the downside, as Sterling may be favoured as a relative safe haven.
The head and shoulders formation that can be seen in the daily time frame is not expected to have much follow through momentum if a break under the neckline passing through 1.5297/1.5235 can be achieved.
Daily Technical Report
