The Pound to Australian Dollar exchange rate retains a positive bias as we approach the final trading session of the week.

GBP/AUD is enjoying upside momentum having jumped when it was announced that Australian inflation had come in below expectations - news that sent the Aussie tumbling against its major competitors.

Meanwhile, the Pound maintains a positive bias as the Brexit story fades and we could well see the impulsive move higher extend.

The GBP/AUD exchange rate has now however moved through resistance from the S2 monthly pivot at 1.6681 which suggests more upside is likely.

Monthly pivots are levels on charts that are expected to obstruct prices and sometimes force reversals or pauses in the trend.

If the level is successfully broken often the exchange rate shoots out the other side with extra momentum as traders betting against the Pound are forced out of the market.

However, the most significant feature on the chart our studies have uncovered is the pattern formed by the last three days:

This pattern is composed of a long up day followed by a narrow sideways day and finally another bullish up day (circled below).

This configuration of days tends to lead to a continuation of the trend higher and is called an “ADX Continuation”.

Assuming today ends at least half way up its range the pattern will be valid.

Sadly, it will not meet one criteria for designation as a very high probability pattern, which is that ADX should be rising between 20 and 35.

For whilst ADX is between those levels, which is positive, it is not rising, which weakens the signal, nevertheless, the candlesticks show a textbook shape, which offsets the falling ADX.

Given the short-term trend is moving higher and an ADX continuation has formed, albeit an imperfect one, the odds support more upside, once the tough resistance ceiling provided by the pivot has been cleared.

We see a move above 1.6731 as confirming a break higher, with a continuation from there, expected to reach the 50-day MA at 1.6800.

The MACD has crossed its signal line offering some corroboration, but it is still below the zero-line which indicates the direction of the trend.