Mecklai graph: Rising Wedge formation in Pound-Dollar chart

Mecklai graph of the day - Rising Wedge formation in GBPUSD

The rising wedge is a bearish pattern that begins wide at the bottom and going ahead the price contracts as it moves higher. As seen in the graph, the pair traded in continuous pattern and consolidated within two rising trend lines. The rising wedge usually forms over a 3-6 month period and the above pattern started since start of 2012. As a reversal pattern, the price will move up with the prevailing trend and regardless of the type rising wedges are bearish in nature.

Pound Sterling surged against US dollar by more than 200 pips taking support of 1.5812 (rising lower trend line) from past three trading sessions on the back of rise in Consumer Price Index (CPI), Jobless Claims falling for the first time since last spring and in yesterday’s MPC minutes, interest rates and QE voting come in at 9-0 and 8-1 to keep rates on hold and maintain the contribution at £325bln. If risk sentiment improves globally we may see the pair to notch higher till 1.62 mark (rising upper trend line) which if holds, a reversal can be expected towards support of 1.5900 levels as the pattern suggest. Once this support is broken convincingly, we could witness sharp selloff in the pair thus confirming the bearish run of the pattern.

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