After rallying for 9 straight trading days, the GBP/USD has finally pulled back. In my Charting the GBP/USD post yesterday, I showed a chart illustrating the extremeness of the move in the currency and talked about how it was prime for a correction. Typically when moves become this overextended, a correction of AT LEAST 100 pips is possible in the GBP/USD and that is what we have seen today. However, the sell-off today has formed what could be a very early Right shoulder in the GBP/USD. Take a look at the following chart and tell me if you see a head and shoulders pattern forming.
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I’ve been waiting for this pullback for a while. I took a look at it on my daily chart and there seems to be a defined neck line, maybe we’re in for a few days of consolidation then a sell off back down to the 1.55-1.5480 level.
Let me just say…… that chart is a beautiful work of art! All the business going on with Brazil and China raising rates makes this risk off trade all the more appetizing. Also their deficit spending is just as bad as ours so I agree that a healthy batch of pips are in order going short!
The left shoulder started forming in late July and made the bottom in early September. The H&S can be seen both on daily and weekly.
I guess there is something we should be looking forward to.