GBP/USD Reverses Off Confluent Support– Constructive Above 1.3226

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• GBP/USDpullback rebounds off confluent support- Outlook remains constructive above 1.3226
• Check out our 4Q GBP/USD projections in our Free DailyFX Trading Forecasts
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GBP/USD Daily Chart

Technical Outlook: GBP/USD has continued to trade within the confines of an ascending pitchfork formation extending off the yearly low with price rebounding off slope support last month. The subsequent pullback off the monthly open highs rebounded off near-term support at the 38.2% retracement of the August advance at 1.3320 with sterling topping the performance charts today vs the USD.

The outlook remains constructive while above confluence support at 1.3226 with a breach above 1.3543 needed to mark continuation of the broader uptrend. A breakout eyes subsequent resistance objectives atthe yearly high close at 1.3589 and the 2017 high / Brexit gap at 1.3658/75.

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GBP/USD 240min Chart

Notes: A closer look at price action highlights a near-term descending channel formation with a prefect rebound off the lower parallel last night shifting the focus back towards the weekly open at 1.3436- a breach above this level clears the way for an advance targeting the high-day close at 1.3495 and the 1.618% extension at 1.3543.

Bottom line: I’ll favor buying pullbacks in price while above 1.3320 targeting a breakout of this near-term formation. A break lower would leave prices vulnerable for a drop into 1.3283 & our broader bullish invalidation at 1.3226. Keep in mind that U.S. November Non-Farm Payrolls (NFP) are on tap tomorrow with the release likely to fuel increased volatility in the dollar crosses.

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• A summary of IG Client Sentiment shows traders are net-short GBPUSD- the ratio stands at -1.19 (45.6% of traders are long) – weak bullishreading
• Retail has remained net-short since Nov 21st, price has moved 1.2% higher since then
• Long positions are 11.9% lower than yesterday and 9.6% lower from last week
• Short positions are 9.1% lower than yesterday and 21.1% lower from last week
• We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current positioning and recent changes gives us a further mixed GBPUSD trading bias from a sentiment standpoint.

See how shifts in GBP/USD retail positioning are impacting trend- Click here to learn more about sentiment!

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Relevant Data Releases

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- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex or contact him at mboutros@dailyfx.com