GBP/USD Ascending Wedge Hits 1.36 Apex: Pullback Likely as Pattern Completes
The British Pound against the US Dollar has reached a critical technical inflection point that strongly favors a near-term pullback. After three years of development, the textbook ascending wedge pattern has hit its apex at the 1.36 "2 Factor Resistance" level - the precise point where both ascending trendlines converge. With this level now being tested, all technical indicators point toward the classic wedge breakdown that typically follows such formations in the immediate term. This convergence represents the completion of a bearish pattern that has been building methodically, and history suggests the near-term resolution will favor the sellers in the coming sessions. However, it's important to note that this short-term bearish outlook doesn't negate the potential for higher prices over the medium to long-term horizon.
The Three-Year Journey: How We Got Here
Looking at the broader picture, GBP/USD has been climbing steadily within this ascending wedge formation since early 2022. The lower yellow trendline has served as reliable support, connecting the major lows and providing a foundation for the pair's gradual ascent. Meanwhile, the upper yellow trendline has acted as a consistent ceiling, repeatedly rejecting attempts to break higher - as evidenced by the multiple red arrows marking failed breakout attempts.
What strikes me about this pattern is its persistence and the respect price has shown for these boundaries. Each time sellers have attempted to push through the lower support around 1.26, buyers have stepped in with conviction. Conversely, every rally toward the upper resistance has met with determined selling pressure, creating this beautifully symmetrical wedge that's now approaching its apex.
The psychology behind this formation tells a fascinating story. Bulls remain optimistic, continuously bidding up the lows and creating higher support levels. However, their enthusiasm wanes as they approach the upper resistance, suggesting uncertainty about the pair's ability to sustain higher levels. This creates the narrowing pattern we see today, with both sides becoming increasingly hesitant as the wedge contracts.
Central Bank Dynamics: The Fundamental Backdrop
The technical picture becomes even more intriguing when we consider the monetary policy landscape shaping this pattern. The Federal Reserve has maintained its federal funds rate at 4.25-4.50% through its May 2025 meeting, with policymakers expressing a cautious "patient" approach toward future cuts. Fed Chair Jerome Powell noted that the risks of higher unemployment and higher inflation have risen, particularly due to tariff concerns, but emphasized that current policy leaves them "well positioned to respond in a timely way".
This contrasts with the Bank of England's more dovish stance. Based on market expectations, UK Bank Rate was expected to stand at 3.6% by the end of 2025, with the BoE indicating they need to be "confident that inflation will remain low and stable" before making further cuts. This policy divergence creates an interesting dynamic where the Fed's cautious approach supports USD strength, while the BoE's more aggressive cutting cycle could weigh on GBP.
However, the technical pattern suggests that regardless of these fundamental pressures, the market is approaching a critical decision point where one side will likely capitulate dramatically.
The 1.36 Apex Test: Classic Wedge Rejection Expected
Price testing the "2 Factor Resistance" at 1.36 represents the textbook completion of this three-year ascending wedge formation. In my 26 years of trading, I've witnessed countless wedge patterns, and the vast majority resolve with a rejection at the apex followed by a swift move back toward the opposite boundary. The current test of this convergence zone exhibit classic signs of exhaustion that typically precede significant reversals.
The significance of this rejection setup cannot be overstated. For three years, these trendlines have contained price action with remarkable precision, creating a narrowing pattern that has now reached its mathematical conclusion. The energy that's been building within this compressed range has reached maximum tension, and ascending wedges historically resolve to the downside in approximately 75% of cases. The coiling effect has reached its limit, and the spring appears ready to unwind in favor of the bears.
From a volume perspective, ascending wedges typically show diminishing participation as they progress toward completion and this aligns with what we're observing. This declining volume often precedes significant breakdowns, as fewer participants are willing to commit to long positions near critical technical resistance levels. The reduced buying interest at these elevated levels further supports the bearish bias.
Support Levels and Multi-Timeframe Perspective
The 1.26 support level, marked with our green arrow, represents more than just a technical boundary - it's a psychological fortress for pound bulls and potentially a launching pad for future advances. This area has provided consistent buying interest throughout the pattern's development, suggesting strong institutional demand at these levels. Should the wedge resolve to the downside as expected, this 1.26 area would likely serve as the primary target and potential reversal zone.
What makes this support particularly compelling is its confluence with the lower ascending trendline. This creates what technical analysts call "double support" - both horizontal resistance and trendline support converging at the same price level. In my analysis, such confluences often prove more reliable than single-factor support zones and frequently mark significant turning points.
From a longer-term perspective, a pullback to the 1.26-1.28 area could actually strengthen the pound's technical foundation. This would provide what I call a "reset opportunity" - clearing out weak hands while creating more attractive valuations for institutional buyers. Many of the most powerful bull runs in currency markets begin after exactly this type of technical consolidation and pullback to key support levels.
For traders considering positions, the risk-reward profile becomes particularly interesting when viewed across multiple timeframes. While the near-term setup favors the bears, a successful test of 1.26 support could mark the beginning of the next major upward cycle for GBP/USD, especially if central bank policy dynamics shift in the coming months.
Primary Scenario: Near-Term Wedge Breakdown, Longer-Term Opportunity
With the ascending wedge having reached its natural conclusion at 1.36, the primary scenario heavily favors a rejection at this apex level followed by a breakdown toward the lower trendline support in the near-term. The measured move from the widest part of the wedge suggests initial targets in the 1.30-1.32 area, with the potential for extension toward the critical 1.26 support zone marked on our chart.
This bearish resolution aligns with the fundamental backdrop, where Federal Reserve hawkishness contrasts with Bank of England dovishness. The technical pattern completion coincides with a monetary policy environment that favors USD strength over GBP, creating a powerful confluence for short-term downside pressure.
However, it's crucial to understand that this near-term bearish view doesn't preclude higher prices over a longer timeframe. In fact, a healthy pullback to the 1.26-1.28 area could provide an excellent foundation for future bullish momentum, particularly if fundamental conditions shift in the pound's favor. Many successful bull markets begin with exactly this type of technical reset, where short-term weakness creates attractive entry points for longer-term positioning.
While a breakout above 1.36 remains possible in the immediate term, such a move would require extraordinary volume and fundamental catalysts to overcome both the technical resistance and the pattern's inherent near-term bearish bias.
The timing of the resolution is now upon us. Currency forecasting experts suggest various targets for GBP/USD, with some projecting rates around $1.25 for June 2025 and $1.22 for December 2025, citing expectations of US Dollar outperformance. These fundamental forecasts align remarkably well with the technical targets suggested by a potential wedge breakdown from current levels.
Market Psychology and the Pullback Setup
What makes this current setup particularly compelling for a bearish resolution is how it reflects the exhaustion of bullish sentiment. The ascending wedge pattern embodies the classic final push of optimistic buyers who have been gradually losing momentum throughout the pattern's development. Bulls have managed to push higher lows, demonstrating persistent optimism about the pound's prospects, yet their repeated failures to achieve meaningful breakouts above resistance reveal the underlying weakness in their conviction.
This psychological exhaustion creates the ideal conditions for a sharp reversal. As the pattern narrows and reaches its apex, the diminishing volume and weakening momentum indicators tell the story of bulls running out of ammunition. The multiple failed attempts at the upper resistance (marked by our red arrows) have conditioned traders to expect rejection at these levels, creating a self-reinforcing bearish bias that typically culminates in swift breakdown moves.
The Broader Economic Context
The GBP/USD technical pattern doesn't exist in isolation but reflects broader economic realities. Market analysts note that divergence between Fed and Bank of England monetary policy expectations, combined with Donald Trump's protectionist measures, may strengthen the US Dollar. The UK economy faces headwinds from uncertainty surrounding trade and a less expansionary budget, while the US demonstrates economic exceptionalism with solid growth.
These fundamental factors suggest that any technical breakdown could be accompanied by sustained selling pressure, making recoveries more challenging. Conversely, should the pair manage to break above the wedge, it would signal that technical factors are overriding fundamental pressures - often a sign of powerful underlying momentum.
Risk Considerations and Invalidation Points
No technical analysis is complete without addressing what could go wrong. The primary risk to this bearish wedge interpretation would be a decisive break above 1.36 with strong volume confirmation. Such a move would suggest that the pattern is actually a bullish pennant rather than a bearish wedge, potentially targeting much higher levels.
Additionally, external shocks - such as unexpected central bank policy shifts or geopolitical developments - could override technical considerations entirely. The recent period has demonstrated how quickly currency relationships can change when fundamental assumptions are challenged.
For those considering trades based on this analysis, position sizing becomes critical given the compressed volatility within the wedge. While the setup offers attractive risk-reward ratios, the potential for whipsaws around the apex requires careful attention to risk management principles.
The Road Ahead: Near-Term Pullback, Longer-Term Potential
With the 1.36 convergence now being tested, all technical evidence points toward an imminent rejection and subsequent pullback in the near-term. The ascending wedge pattern has fulfilled its mathematical requirements, and the typical resolution involves a swift move back toward the lower boundary. Volume patterns and momentum indicators support this bearish bias, as buying pressure has visibly weakened near the apex.
However, experienced traders understand that market movements unfold across multiple timeframes, and this near-term bearish setup could paradoxically create the foundation for longer-term bullish opportunities. A healthy pullback to the 1.26 support area would accomplish several important technical objectives: it would clear out speculative positions, test the resolve of institutional buyers, and potentially create more attractive entry points for those with a longer-term bullish view on the pound.
The convergence at 1.36 represents the natural culmination of three years of market psychology and price compression. Having reached this technical completion point, the pattern's immediate bearish implications are now coming into focus. Rather than waiting for further confirmation, many traders are likely positioning for the breakdown that typically follow such formations.
This represents exactly the type of high-probability setup that separate successful traders through disciplined pattern recognition across multiple timeframes. The market has telegraphed its near-term intentions through this methodical wedge development, while potentially setting the stage for future opportunities once the technical reset is complete.
