Moty Levanon | January 6, 2026
The attached monthly GBPUSD chart highlights the development of a Morning Star candlestick formation, a classical bullish reversal pattern that appears after a corrective or declining phase. On a higher time frame such as the monthly chart, this structure carries increased technical weight and often reflects a shift in long term market sentiment rather than a short lived correction.
From a price action perspective, the pattern is formed following a sequence of lower momentum candles that signal seller exhaustion. The middle candle reflects market indecision and reduced volatility, while the subsequent bullish candle demonstrates renewed demand and acceptance of higher prices. The location of this pattern above rising long term moving averages reinforces the constructive technical backdrop and suggests that buyers are defending higher value areas rather than reacting from deeply oversold conditions.
Structurally, GBPUSD continues to trade within a broader ascending framework that has been in place since the post 2022 lows. Higher monthly lows and the ability of price to remain above medium and long term averages indicate trend persistence rather than a terminal move. The Morning Star formation therefore acts as a continuation signal within an established recovery cycle rather than a counter trend reversal.
From a fundamental standpoint, the British pound has benefited from relative monetary policy stability compared with previous periods. The Bank of England has maintained a restrictive stance for longer than initially expected, supporting yield differentials and underpinning sterling demand. At the same time, inflation dynamics in the United Kingdom have shown gradual moderation without a sharp deterioration in growth, reducing immediate pressure for aggressive rate cuts.
On the US dollar side, expectations of a maturing Federal Reserve tightening cycle and increased sensitivity to economic slowdown risks have reduced the structural support for sustained dollar strength. As rate differentials compress and global risk appetite stabilizes, GBPUSD becomes more responsive to capital rotation flows rather than pure safe haven demand.
The convergence of a high time frame bullish candlestick pattern with a supportive macro environment increases the probability of continuation toward higher resistance zones over the medium to long term. However, sustained follow through remains conditional on macro data alignment, particularly labor market resilience in the United Kingdom and confirmation of easing financial conditions in the United States.
Risk Disclosure and Legal Notice
This analysis is provided for informational and educational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any financial instrument. Trading in foreign exchange involves significant risk and may not be suitable for all investors. Past performance and chart patterns do not guarantee future results. Readers are solely responsible for their own trading decisions and are advised to conduct independent research and consult a licensed financial professional before engaging in any trading activity.
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