[AndrewWoo]

• GBP-USD is losing upside momentum and regaining 1.70 will be a challenge

• A potential, head and shoulders topping pattern is forming

• Technically, cut long positions on failure to regain 1.6665-1.7041

Analysis – Daily Chart
The GBP-USD daily chart highlights the recent choppy activity as the spike move above 1.70 failed to hold. GBP-USD could be in a slightly rising channel, which could continue to determine the trend for some time yet. However, there is a risk that the consolidation is actually a topping pattern as a possible head and shoulders pattern unfolds. This pattern is formed from the 3 June high (shoulder 1), 5 August high (head), which leaves the possibility of another shoulder materializing in coming sessions. A drop below rising trend-line support (neckline) would confirm this topping pattern, coming in at 1.6120 just now. Chart support from the 17 August low comes in near 1.6280 ahead of this. Moving average (MA) studies are mixed as the 20-day MA at 1.6595 is offering resistance, while the 60-day MA at 1.6444 offers nearby support. The 250-day MA continues its descent beneath spot at 1.5590 and serves as a long-term pivot point for spot.

Analysis – Weekly
The rally in GBP-USD in Q2 this year has extended, but signals are beginning to emerge that the upside may be capped now. While a move to 1.7334, the 50% retracement of the fall from 2.1162 to 1.3506 had been expected, it does look like the 5 August spike high at 1.7041 was ‘it’ for the rally. With the possibility of a head and shoulders reversal on the cards, the risk would look to be on the downside. A turn below neckline support at 1.6120 would leave a bearish move towards 1.5100/1.5000 to attract on a simple swing measure. A turn below this area (with medium-term chart support at 1.52) would leave 1.40 and then 1.35 open again. The 50-week momentum oscillator is above the zero line and supports a bullish trend though, but this may be a lagging indicator at the moment. A turn above 1.7041 will be needed to turn the focus onto the upside again, leaving 1.7334 and then 1.80 to aim for if seen. A turn to lower levels looks more likely now.

Strategy – Three-Month View
GBP-USD is expected to trend below 1.6120 over the next three months. Technically, use short-term rallies to eliminate long positions ahead of key resistance at 1.7041.