GBP may revisit 2016 bottom as technical analysis points to a negative model

The pound managed to keep above the psychological support of $ 1.20 this month, even with the increased uncertainty surrounding Brexit and yet the chart suggests that the market may be preparing for a new test of the level .

In the face of the risk of parting with the EU without a deal and the global trading tensions weighing on the currency , technical analysis supports the downside.

Britain's currency forms a bearish pattern on Friday, the so-called Downside Tasuki Gap, signaling the continuation of the downtrend.

This pattern was confirmed when the first bar prolonged the downward movement, the second made a gap down and the third closed up, although it failed to cover a gap of the first two. Weekly bearish patterns have historically been associated with new downtrends, so this can be used as a good guide to determining the short to medium term trend. Sterling fell for the second consecutive day today.

The pound touched $ 1.2015 on August 12 - the lowest level since the beginning of 2017. If the currency breaks below $ 1.20, it could dip to the bottom of $ 1.1841 formed during the October 2016 flash crash.

Source: Bloomberg Finance L.P.

Chart: Used with permission from Bloomberg Finance L.P.

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