GBP/USD & SOY MEAL

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Followers of Tech Charts blog will remember my earlier analysis on Soy Meal which was posted in March. Soy Meal had one of the best technical chart patterns; symmetrical triangle. It was a long-term chart pattern which made it even more significant.

http://techcharts.wordpress.com/2012/03/05/soy-meal-3/

Soy Meal broke out of its long-term consolidation at 370 levels in March and has been moving higher since then. It has been a powerful breakout followed by a pullback in June. Recent rally is being supported by the weather news in grains market. Whatever the reason is it has been a perfect technical action.

This is how a long-term symmetrical triangle resolves and this is the type of technical action we should expect after such a breakout.

Now let’s look at another long-term symmetrical triangle on GBP/USD. Please not that for ease of display I  have inverted the price scale. So a breakout on the upside will result in weak GBP and strong USD. GBP/USD not only formed a large-scale symmetrical triangle it also formed a minor horizontal consolidation range between 1.52 and 1.62. GBP/USD should be on our watch list. I expect a strong move in the following months which should be no less than the magnitude we have seen on Soy Meal breakout and rally. A breakout above (below) 1.52 levels can easily target 1.35 levels. This would be a massive devaluation for the pound and strength for the dollar.