GBP/USD Can Gain Nearly 9% in April on This Chart Pattern

GBP/USD Can Gain Nearly 9% in April on This Chart Pattern
Written by:
Michael Harris
3rd April, 13:36
  • UK reports the deadliest day so far with 684 new victims of COVID-19 and 4,450 new infections
  • Chancellor Sunak unveiled new measures to help small and medium-sized enterprises
  • GBP/USD is potentially creating a bull flag pattern which can take the pair to $1.33 if activated and complete

GBP/USD has rebounded strongly off the 35-year lows set two weeks ago, recovering around half of the previous losses. The pair has been creating a bull flag formation, which, if completed, can take the price action to $1.33.

Fundamental analysis: Worst day so far

The UK reported today that the death toll has risen to 3605 vs 2921 yesterday. Today, 684 new deaths were reported in the deadliest day so far, while the number of infected persons rose by 4,450 in the last 24 hours.

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The UK health secretary, Matt Hancock, reported that the worst-case scenario may yet materialize for the UK. Accordingly, the health authorities expect that Easter Sunday (April 12) could be the peak for virus outbreak in the UK.

In the meantime, the UK PM Boris Johnson posted an update on his Twitter profile in regards to his health situation. Johnson tested positive on COVID-19 last week.

Yesterday, UK Chancellor Rishi Sunak unveiled new measures for small and medium-sized enterprises (SME). The loan scheme comes under “Covid Business Interruption Loan”, a funding package created for companies that are struggling to secure regular commercial financing.

“We are making great progress on getting much-needed support out to businesses to help manage their cash flows during this difficult time – with millions of pounds of loans and finance being provided to hundreds of firms across the country,” said Sunak.

Around 1,000 loans have already been processed under this scheme, worth around £90 million.

“And now I am taking further action by extending our generous loan scheme so even more businesses can benefit. We have also listened to the concerns of some larger businesses affected by COVID-19 and are announcing new support so they can benefit too.”

Technical analysis: Bull flag can launch GBP/USD higher

Following the creation of a 35-year low two weeks ago, the pound rebounded strongly from the multi-decade lows, gaining more than 1,000 pips off these lows. The first attempt to get above the $1.25 handle failed, pushing the sterling lower towards the intraweek support at $1.22.

GBP/USD daily chart (TradingView)

The rebound has helped the pair build a potential bull flag pattern, which is a bullish formation. A break of the upper trending line of the flag, coming around the $1.2470 mark, would activate the bull flag, while its completion could take GBP/USD to $1.33, or 8.5% higher compared to the current market price.

Summary

GBP/USD has had a strong recovery from the multi-decade lows as the pair tested a $1.25 mark. The pair is now creating a potential bull flag, which could take the pair to $1.33 if activated and ultimately completed.

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