GBP/USD pair has finally escaped from the major ascending channel signaling that bears are very strong on the Daily chart. The price is trading at 1.2943, below the 1.2959 former low, but only a drop below the 1.2904 level could open the door for a larger drop in the upcoming period.
The pound plunged after the UK left the EU. GBP/USD is trading inside the critical support area between 1.2952 and the 1.2904 levels, a valid breakdown will give us a great selling opportunity. The US is to release the NFP, Unemployment Rate, and the Average Hourly Earnings later, some good data could force GBP/USD to make another lower low and to confirm the selling opportunity.
GBP/USD has registered only a false breakout above the sliding line (SL), above the 23.6% retracement level and from the triangle chart pattern, so the drop is natural. The pair is trading right below the uptrend line, a valid breakdown below this line and a lower low, a drop below 1.2904, could lead the price towards the 50% retracement level.
A potential drop could be invalidated only if the price is rejected from this support area and makes a false breakdown from the major ascending channel if it comes back within the upward channel's body and above the median line (ML).
- Trading Tips
You should wait for a valid breakdown below the 1.2904 - 1.2900 area before you decide to open a short position, it is not recommended to sell this pair at this moment because GBP/USD is within the support area, 1.2952 - 1.2904, and on the 38.2% retracement level and on the SL1 dynamic support.
If the selling opportunity is confirmed, GBP/USD should drop at least till the 50% retracement level, the second target is at 61.8%, while the major downside is seen at the lower median line (LML) of the ascending pitchfork.
