GBP/USD Prices Testing Support- Risk for Further Losses Remains
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- GBP/USDtesting support; near-term risk remain lower- broader outlook constructive
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GBP/USD Daily Chart
Technical Outlook: GBP/USD has been trading within the confines of an ascending pitchfork formation dating back to last year with an outside-day reversal at the highs shifting our focus lower earlier this month. Prices broke below slope support today with the decline now testing the 61.8% retracement at 1.2850. Note that the 200-day moving average also converges on this region and may offer stronger near-term support.
That said, the focus remains lower while below the 50-line with a break lower targeting the lower parallel, currently just above the 1.27-handle- an area of interest for possible long-entries with broader bullish invalidation steady at 1.2616/28- a region defined by the 200-day moving average and the 50% retracement.
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GBP/USD 240min Chart
Notes: A closer look at price action highlights this break with the intraday momentum holding deep in oversold territory. The immediate focus is lower sub 1.2928 with a break lower eyeing initial targets at the 1.28-handle, 1.2775 & the lower parallel at 1.2706/20.
Keep in mind we have UK employment on tap tomorrow ahead of the FOMC minutes- added caution is warranted into these releases with the events likely to fuel increased volatility in the British Pound and Dollar crosses. From a trading standpoint, the focus remains lower for now, but I’ll be looking for a drop into structural support to offer more favorable long-entries.
- A summary of IG Client Sentimentshows traders are net-short GBP/USD- the ratio stands at -1.01 (49.8% of traders are long) –weak bullishreading
- Long positions are 17.2% higher than yesterday and 17.7% higher from last week
- Short positions are 1.7% lower than yesterday and 18.7% lower from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/USD prices may continue to rise. That said, traders are less net-short than yesterday and compared with last week and the recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
What to look for in GBPUSD retail positioning - Click here to learn more about sentiment!
Relevant Data Releases
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- Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex or contact him at firstname.lastname@example.org.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.