After Reuters reported the EU and the UK are “on cusp of a Brexit trade deal” the Gbp/Usd turns out to be a major, Monthly Bullish Double Bottom chart pattern.
Major chart pattern breakouts generally require a fundamental driver to be successful and the Monthly Double Bottom in Cable already comes at a time when the USD is undergoing a process of devaluation by the Federal Reserve in order to support Equity prices. This in and of itself increases the odds of this chart pattern succeeding, however, any incoming Brexit Deal will send the GBP higher as well creating both a Negative (USD) and Positive (GBP) fundamental driver in the direction of this major Double Bottom breakout.
A conservative target for this chart pattern is the 1.5050 and is obtain by measuring the breakout point compared to the highest low (left low) of the Double Bottom pattern and projecting that distance by 1 x to the upside, from the breakout point.
Interestingly the Double Bottom pattern itself is the “right low” of an even bigger Double Bottom pattern which would be confirmed on a break above the 1.4377.
A confirmed break of the 1.4377 in GbpUsd will project a new conservative target to the upside, obtained in the same way as the previous target on the lesser pattern, and would sit at the 1.6800 – 1.6850 area.
As always seems to be the case with the ongoing Brexit negotiations, a deal isn’t done until it is done. Deadlines historically during these negotiations have meant little. However if a Brexit Deal is finally pushed over the line in the next few days the Bullish case for Cable looks extremely strong with the Bearish case for this currency pair, in comparison, looking very weak. As always time will tell but, right now, this market looks like one to watch.