GBP/USD Breaks Below Key Level as Institutional Repositioning Takes Hold

The GBP/USD currency pair has completed a textbook head-and-shoulders pattern and broken below its critical neckline, triggering institutional repositioning away from sterling.

Yesterday's US dollar-related data releases were in line with expectations, but the lack of surprise seemed to be a catalyst for some institutional positioning. The US dollar gained as a result, suggesting that the path of least resistance in GBP/USD is now switching to bearish rather than bullish.

The price has been repeatedly testing and failing to break out of its long-term range, with new resistance levels printed along the way. A crucial lower high developed, and the price finally pushed below the obvious neckline area near 1.3600, indicating that the head-and-shoulders pattern may have completed.

The failure to break above the 1.3650 area and repeated attempts to push through it are bearish signs of exhaustion amongst buyers. The former support level at 1.3618 has now flipped to become new resistance, a highly bearish sign in the Forex market.

A potential bullish scenario suggests that the price may move lower to 1.3565 or 1.3550 before producing a strong bullish bounce and pushing prices upwards to make a new 6-month high.