GBP/USD: On the cusp of a key breakout at 1.27

The bearish price action ahead of the key support at 1.27 enhances the prospects of a potential breakout. While the Tuesday’s candle close held the level, the full reversal candle (V-shape type) tends to be a sign that increased downward pressure is likely. If it serves of any consolation, the UK vs US 5-year yield spread does not justify a breakout, but with risk off at full steam and the lay of the land in Brexit still very muddy, one can certainly find enough triggers that would lead to an eventual breakout.

The hourly chart show a clear range with 1.27-1.2840 the lines in the sand drawn by market participants. The second attempt at 1.27 on Dec 4th, which followed the tepid one the prior day, has been greeted by a huge absorption candle, which makes a retest of 1.27 a potential exit for those trapped shorts on the breakout. This means we may see intraday upward pressure into Dec 4 POC at 1.2740. Only a break and acceptance above would then increase the prospects of a range extension. When trading ranges, pay attention the side in control of the mid-point of the range at 1.2770.