Hello and welcome back to CantosCharts. I'm David Jones from spread betting company IG Index and today we're going to take a look at the fate of the GBP against the USD.

I've brought up a chart first of all, a fairly long-term chart, going back to April/May of last year and for much of the last eight months or so, GBP/USD has been stuck in a fairly sideways but volatile trading range. We've seen it really peak during last summer around about 170 and then sell off back down towards the 158 level and then rally and just carve out this very large sideways range. So, of course, if we're looking at a long-term chart and we see a sideways range, the textbook approach is to have a little bit of patience and see which way the market breaks out of that range to try and give us an indication as to the future direction. Over the course of the last week, week and a half, we have seen a breakout and, based on the charts, it doesn't look too good for GBP against USD.

Over the last few months, as I've said, whenever we've seen the market dip back down to the sort of 157/158 level, we've seen the buyers come back in and that's really been the case since late May/early June of last year. We've seen any trips down to sort of 158 have proved to be fairly short lived. So we've seen the idea of the market rejecting the prices down here only to recover and bounce back away from that area. But over the course of the last week and a half we've seen what many technical analysts would term "acceptance" down here where we haven't seen the sharp bounce backs. We've broken down to this old support, so again, it does suggest that maybe we are seeing just now the start of a shift in sentiment towards GBP against the USD that's going to push it lower over the next few months or so.

Taking a look at this whole sideways pattern - I'm not a big fan of patterns like head and shoulders, triple tops all that sort of stuff -but for some people, what we've seen in GBP/USD throughout the second half of last year and early this year could amount to a double top where the market goes up, it comes back down, rallies almost as high as the previous top, runs out of steam, pulls back down and then breaks below this previous low.

So if we were looking at patterns, many people, when they look at patterns, will look at the height of the pattern to try and figure out well where is this market going to go next. So again, projecting that down, it gives us a target of around about 1,450 for GBP/USD, so that's a good 1,300 or 1,100 points or so lower than where we are now.

Personally, I think that maybe that's a little bit too bearish to the moment, but I don't think it's too much to expect GBP/USD to slip back to these mid-May levels around about 150. So this break last week was quite a bearish one for GBP against USD, so it does look like we're going to see a bit more weakness I think in the months to come.

Looking at the shorter term chart, of course, markets don't move in a straight line so we shouldn't all wake up tomorrow and expect to see the GBP trading 1,000 points lower against the USD. It's going to take a time to get to where we're going. Over the last week, on the downside, we had seen this sort of 155.50 area underpin any short-term weakness. So that could still be the case maybe in the days to come.

Maybe if we see some sell offs from where we are now we will see short-term buyers coming back in ahead of this level.

So again, one trading idea is to buy short-term weakness back to here, back to the 155.50 with a very tight stop below. So I'm not ruling out any short-term rallies in GBP/USD, but taking the longer term picture, this break below 157 over the last week or so isn't good and the daily charts for now are pointing to further weakness for Cable to come.