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In this series we scale-back and take a look at the broader technical picture to gain a bit more perspective on where we are in trend. Here are the key levels that matter on the weekly charts for the British Pound (GBP/USD). Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

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GBP/USD Weekly Price Chart

GBP/USD Price Chart - Weekly Timeframe

Notes: The British Pound is down more than 7% from the yearly highs with price continuing to trade within the confines of descending pitchfork formation extending off January / April highs, just above support at 1.3182 (low registered at 1.3205). Note that weekly momentum held above 40 on this sell-off and IF Sterling is going to bounce near-term, this would be a good spot.

Confluence resistance stands at 1.3450/94 where the 2017 high-week reversal close and the 52-week moving average converge on the 50-line of the downslope. A weekly close above this threshold would be needed to suggest a more significant low is in place with such a scenario targeting the 2016 high-week reversal close (Brexit) at 1.3675.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Bottom line: Sterling is testing downtrend support and the immediate short-bias remains at risk near-term while above 1.3182. From a trading standpoint, a final washout into this region may offer an opportunity to fade a portion of this decline. That said, the broader outlook does remain weighted to the downside while within this formation and a larger correction here could offer more favorable short-entries in the weeks ahead. A break lower would invalidate the rebound play with subsequent support objectives at eyed at 1.3036 and the 61.8% retracement at the 1.29-handle. For now, the immediate focus is on a break of the 1.3182-1.3494 zone for guidance as price carves out the June opening range.

GBP/USD IG Client Positioning

GBPUSD Client Positioning
  • A summary of IG Client Sentimentshows traders are net-long the British Pound (GBP/USD)- the ratio stands at +2.96 (74.8% of traders are long) – bearishreading
  • Retail has remained net-long since April 20th; price has moved 6.4% lower since then
  • Long positions are 14.0% higher than yesterday and 3.3% higher from last week
  • Short positions are 1.8% higher than yesterday and 12.3% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger GBP/USD-bearish contrarian trading bias from a sentiment standpoint.

Why does the average trader lose? Avoid these Mistakes in your trading

Relevant Data Releases

GBP/USD Economic Calendar

Economic Calendar - latest economic developments and upcoming event risk

Previous Weekly Technical Perspectives

--- Written by Michael Boutros, Technical Currency Strategist with DailyFX

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