GBP/USD technical analysis: Looks north with double bottom breakout

• GBP/USD's double bottom breakout has put the bulls in a commanding position.
• The pair may shake out weak hands before rising to 1.25.

GBP/USD closed above 1.2310 (Aug. 27 high) on Thursday, confirming a double bottom breakout on the daily chart.

A double bottom breakout is a bullish reversal pattern and its reliability is high when it appears following an established downtrend, which is the case here.

The breakout has created room for a rally to 1.26 (target as per the measured move method). That said, markets often shake out weak hands by revisiting the former resistance-turned-support before building on the breakout.

So, a pullback to levels below 1.2310 (former resistance-turned-support of the neckline) before rising toward the immediate resistance at 1.25.

Supporting the bullish case are the above-50 reading on the relative strength index and the positive moving average convergence divergence histogram. The 50-day moving average has also shed the bearish bias (bottoming out).

As of writing, the pair is sidelined around 1.2329, representing little change on the day.

Daily chart

Trend: Bullish

Technical levels