A double bottom reversal pattern can clearly be seen on Cable’s 4-hour forex chart, indicating that a long-term rally might take place.

Price is currently testing the neckline of the pattern around the 1.5000 major psychological resistance.

An upside break from this level could mean a 400-pip climb for the pair, as this is the same height as the chart formation. This could take the pair up to the 1.5400 mark, which is near the next area of  interest visible on the long-term chart.

On the other hand, if the neckline resistance holds, price could head back to the previous lows near the 1.4600 major psychological level. A bounce off this area could create a triple bottom chart pattern, which would still be a valid reversal signal.

Much could depend on the upcoming release of the BOE meeting minutes, which might indicate what policymakers have in mind for potential interest rate changes. Recall that the BOE had been less hawkish than usual as weak inflation and their currency’s appreciation are making it difficult for the economic recovery to take hold.

If this downbeat outlook is reiterated in their latest minutes, Cable could be in for another sharp selloff to the nearby support levels. On the other hand, if BOE Governor Carney reverts back to a hawkish stance, the pair could have a chance at breaking higher and confirming the potential reversal.

The path of least resistance is to the downside though, as the latest inflation and employment figures have fallen short of expectations. Data from the US hasn’t been impressive also, but the Fed is still widely expected to start hiking interest rates later on this year. Risk aversion is also in favor of the US dollar for the time being, as the ongoing debt talks in Greece and the upcoming UK elections pose market risks.

By Kate Curtis from Trader’s Way