GBPUSD – Daily Timeframe Analysis: Head & Shoulders Pattern

4 days ago

The GBPUSD daily chart is currently presenting a textbook Head & Shoulders reversal pattern, a powerful bearish signal that often marks the end of an uptrend and the beginning of a new downward cycle. This setup demands attention from swing and positional traders alike, especially considering the size and clarity of the structure.

🔍 Pattern Breakdown

Left Shoulder: Formed in late May, establishing a significant high before a corrective move.
Head: A higher peak was made in early June, which now stands as the pattern's highest point.
Right Shoulder: A lower high formed in mid-July, indicating weakening bullish momentum.

Neckline: The crucial horizontal support zone around 1.3330–1.3340 was tested multiple times and has now been decisively broken, triggering a confirmed bearish setup.

📊 Technical Significance

This Head & Shoulders pattern becomes especially meaningful due to:
Multiple rejections at the neckline, confirming its strength as support-turned-resistance.
Bearish volume expansion on the breakdown, adding weight to the selling pressure.
Formation on a daily timeframe, suggesting a long-term trend reversal rather than a short-term pullback.

📌 Trading Strategy for Traders
✅ Sell Setup (Short Position)
Entry: Around the neckline zone on retest (1.3320–1.3340)
Stop Loss: Above the right shoulder (~1.3550)
Targets:
🎯 Target 1: 1.3100 (psychological and horizontal support)
🎯 Target 2: 1.2900 (measured move from head to neckline)
🎯 Target 3: 1.2650–1.2600 (extended downside zone based on structure)

⚠️ Risk Management Tips:

Don’t chase the breakdown — wait for a pullback/retest of the neckline to get a better risk/reward entry.
Ensure position sizing is appropriate based on the stop loss distance.
If price reclaims the neckline with strong bullish momentum and closes above 1.3350, exit short and reevaluate.

🧠 What Traders Should Keep in Mind

Macro Fundamentals: Watch upcoming economic events like BoE rate decisions, US NFP, and inflation data, which can cause volatility and impact the technical scenario.
Dollar Index (DXY) trend should also be monitored closely. If DXY rallies, GBPUSD breakdown can accelerate.
Trendline Confirmation: Align this with any break of rising trendlines drawn from previous lows.

📌 Final Thought
This pattern marks a crucial turning point in GBPUSD. The momentum has clearly shifted from buyers to sellers, and the breakdown opens up significant downside room. As a swing or position trader, this is a high-probability setup with a clear invalidation point (above the right shoulder) and a favorable risk-reward ratio.

📉 Patience and precision are key here. Let price come to you at the neckline, confirm rejection, and then take the trade with confidence.

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Disclosure: I am part of Trade Nation's Influencer program and receive a monthly fee for using their TradingView charts in my analysis.
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2 days ago

Trade active

Ready to re-test breakout level lets watch.

2 days ago

Note

Still Holding Bearish Structure

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