Market sentiment on GBP/USD seems uncertain on the H4 chart. The price has developed an important technical pattern, a valid breakout from this triangle will give us a chance to open a trading position. The price is trading in a major support area, so a rejection will signal the GBP increase.
The currency pair remains in the buyer's territory, so the outlook is still bullish despite the minor corrective movement. Still, we need a confirmation that GBP/USD will jump towards new highs, that's why we have to wait for a valid breakout from the chart pattern.
GBP/USD has managed to escape from the descending pitchfork's body and now it has come back to retest the upper median line (UML). It has retested the triangle's support, so a rejection from here will send the price at least towards the chart pattern's resistance.
Personally, I believe that only a valid breakdown below the 1.2952 - 1.2905 area will signal a potential larger drop. I would like to see an important false breakdown (Pin Bar) below the triangle's support or a bullish engulfing pattern before the price starts increasing again.
We cannot talk about a potential decline as long as GBP/USD is trading above 1.2952. Only a valid breakdown below this level and a lower low, a drop below 1.2905, will announce a larger correction.
Fundamental AnalysisThe Federal Reserve will publish the decision on the Federal Funds Rate later today, so you should be ready for some volatility on this pair. The FED is expected to keep the interest rate steady at 1.75%. If you are not an experienced trader, maybe it will be better to stay away during the FOMC Press Conference because this event could trigger sharp price swings.
The US is to release the Goods Trade Balance, the Prelim Wholesale Inventories and the Pending Home Sales. Some poor data could ruin the USD and could give birth to GBP/USD bullish momentum.
Trading RecommendationsIf you want to sell this pair, you should wait for a valid breakdown below the 1.2905 low. I don't believe that only a breakdown from the mentioned chart pattern will confirm a significant drop. A breakdown to the downside and below the 1.2900 psychological level could signal a drop towards 1.25 - 1.24 area. Stop Loss should be placed above a former high.
Personally, I'm poised going long on this pair only if the price makes a valid breakout above the pattern's resistance (downtrend line). I'll place a Stop Loss below the triangle's support. The first upward target could be at the 1.3514 higher high.