GBPUSD has formed lower highs and higher lows on its 1-hour time frame, creating a symmetrical triangle pattern that could be due for a breakout soon.

Price is currently testing the triangle support at 1.2460, still trying to decide whether to go for a bounce or a break.

A candle closing below the 1.2450 minor psychological level could be enough to confirm a break lower, which could set off a longer-term drop for the pair. Note that the chart pattern is approximately 200 pips tall so the resulting breakdown could be of the same size. Similarly, a break past the triangle resistance around the 1.2500 mark could set off a 200-pip climb.

The 100 SMA is below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. However, the gap is pretty close so moving averages could be oscillating to indicate range-bound conditions. Stochastic is heading south so there’s some selling pressure left before it indicates oversold conditions.

Event risks for this trade setup include the release of UK manufacturing and industrial production reports. The former could show a 0.3% gain while the latter is slated to post a 0.2% uptick. The goods trade balance is also due, along with the UK Halifax HPI.

The bigger catalyst could be the US NFP release as this could be indicative of future Fed policy changes. Analysts are expecting to see an increase of 174K in hiring, with leading indicators such as the ADP non-farm employment change report and the ISM manufacturing PMI surveys showing mixed signals.

By Kate Curtis from Trader’s Way