GBPUSD has been forming higher lows and lower highs, creating a symmetrical triangle pattern on its 1-hour time frame. Price recently bounced off the triangle support and looks ready to make another test of resistance.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside, which suggests that the triangle resistance around 1.3200 could keep gains in check. Stocahstic is almost in the overbought region but seems to be turning lower, indicating that sellers are ready to push price back down again.
Increased selling pressure could lead to a downside breakout, possibly pushing GBPUSD lower by 700 pips or the same height as the triangle formation. However, if buyers take over, price could push past the triangle resistance and rally by 700 pips as well.
Event risks for this setup include the release of the US advanced GDP reading for Q2. A growth figure of 2.6% is eyed, nearly thrice as much as the 1.1% growth seen for the first quarter of the year. Stronger than expected data could keep expectations of a Fed rate hike in play, pushing the dollar higher against its counterparts.
Earlier in the week, the UK printed a stronger than expected Q2 GDP reading of 0.6% versus the projected 0.5% expansion and the previous 0.4% reading. However, this failed to spur a strong pound rally since it reflects economic performance prior to the EU referendum. Traders paid closer attention to sharp fall in CBI realized sales from 4 to -14 instead.
The FOMC statement came in line with expectations since Fed officials kept policy unchanged but highlighted the progress in the US economy. This spurred risk appetite after the announcement, weighing on the safe-haven dollar, but demand for the Greenback soon resumed in the later sessions.