The British pound is in fact ready to break out, it simply needs some type of catalyst to make that happen. Election polls seem to be one of the most likely candidates, but we also have the Brexit itself, so therefore we will sooner or later get some type of noise out of the United Kingdom that should move this pair. If we break above the 1.30 level, then the market would then have the energy to go looking towards the 1.33 level above. After that, then we need to start focusing on the size of the flag that would have been broken, looking likely to go looking towards the 1.38 level.
Underneath we have the “golden cross” that has recently happened and now it looks likely that there is plenty of support at the 1.28 level, extending down to the 1.2750 level after that. With that being the case, a breakdown below that level would be rather concerning, but when you look at the chart it isn’t hard to see a bit of an inverted head and shoulders pattern as well. That opens up the door for a 300 pips move anyway. All things being equal, I can find plenty of reasons from a technical analysis standpoint that this pair is going to go higher.
Unless we get some type of massive disaster with the election, the British pound is likely to continue going higher. If that’s going to be the case, then it’s hard to tell what happens next because the whole thing will become unraveled. Ultimately, the market should continue to be noisy, but it looks as if we are getting relatively close to the end here. Once we get that momentum to break out to the upside it is going to be rather quick, as the momentum has been building up for some time. Think of it this way: we have been in this range for a couple of months now, waiting for some type of catalyst to kick this thing off. Once it does, it should be rather interesting to say the least. Ultimately, this is a market that is simply waiting for a reason to rally, and once it does it should be explosive. If we were to break down below of the moving averages, at that point we would have to reset and reevaluate whatever fundamental noises going on at the moment.
