Inverse head and shoulders pattern to form upon GBPUSD break of 1.358

By the end of August, the GBPUSD currency pair had recovered half of July’s losses. The price found support near the 200-day exponential moving average (EMA200), and a rebound from this level triggered a new wave of growth. Although a local correction interrupted the uptrend last week, bullish momentum has resumed in recent days. On the H2 timeframe, an inverse head and shoulder pattern appears to be forming. Its completion will be confirmed upon a break above the 1.358 neckline, which would pave the way for a move toward the summer peak near 1.378.

The MACD indicator has returned to positive territory on most timeframes, highlighting GBPUSD’s further upside potential. A breakout above the neckline at 1.358 is likely to significantly increase market activity. However, entering a profitable long position may become more challenging after such a move. A drop below 1.34—a level connecting the pattern’s right and left shoulders—would invalidate the current bullish scenario.

Yesterday, the US GDP data for the second quarter were revised upward from 3% to 3.3%, providing temporary support for the dollar. Nevertheless, the broader outlook for the US currency remains negative. Fed Governor Christopher Waller reaffirmed the central bank’s intention to cut interest rates in September and suggested further easing in the coming months. According to him, the borrowing costs in the US have to reach a neutral level of 3%, compared to the current range of 4.25–4.50%.

Meanwhile, the Bank of England (BoE) is expected to take a pause at its next meeting due to stubbornly high UK inflation that could climb to 4% in September. This week’s data showed that the Producer Price Index (PPI) in Britain surged to a two-year high, justifying the central bank’s restrictive stance. This policy divergence between the US and the UK is likely to boost the GBPUSD’s rise.

Consider the following trading strategy:

Buy GBPUSD at the current price. Take profit: 1.358. Stop loss: 1.34.