GBP/USD Trade Setup: Breakout Likely

The British Pound/U.S. Dollar (GBP/USD) currency pair is currently testing the upper resistance line of a descending parallel channel. In technical analysis, a descending channel is formed by two parallel, downward-sloping lines that contain price action, marking pivot highs and lows. While the trend within the channel is downwards, these patterns often resolve with an eventual upside breakout.

Trading principles suggest that the probability of such a breakout increases significantly with repeated tests of a channel boundary. Specifically, after the third test of a trend line in a descending channel, the likelihood of a subsequent bullish breakout is considered much higher. Since the GBP/USD has now tested this upper trend line four times, technical analysis suggests a strong probability, estimated to be above 80%, that the pair will soon break upwards out of this channel formation.