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In this series we scale-back and look at the broader technical picture to gain a bit more perspective on where we are in trend. The British Pound has rallied more than 3% off fresh yearly lows since the start of the year with the recovery failing this week just ahead of multi-month slope resistance. Here are the key targets & invalidation levels that matter on the GBP/USD weekly chart. 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 Weekly Price Chart

Notes: Sterling has been trading within the confines of a descending pitchfork formation extending off the 2018 highs with price rebounding sharply off confluence support into the close of the year at 1.2433/69- a region defined by the 78.6% retracement of the 2016 advance and the post-Brexit low- week close.

The advance turned just ahead of critical resistance this week at 1.2945/72 where the 61.8% retracement of the September decline, the October trendline, and the upper parallel of the pitchfork. A breach / close above this threshold is needed to validate that a more significant low was registered earlier in the month with such a scenario targeting the 38.2% retracement of the 2018 decline at 1.3181.

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

Bottom line: The British Pound is losing steam just ahead of broader down-trend resistance and leaves the immediate recovery at risk while below 1.2972. From a trading standpoint, the immediate threat may be lower but IF Cable has turned, losses should not surpass the low-week close at 1.2721- weakness beyond this level would expose the 2018 low-close at 1.2582 backed by 1.2433/69.

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GBP/USD Trader Sentiment

GBP/USD Trader Sentiment
  • A summary of IG Client Sentiment shows traders are net-short GBP/USD - the ratio stands at -1.01 (-49.8% of traders are long) – neutral reading
  • Long positions are 0.2% higher than yesterday and 0.5% lower from last week
  • Short positions are 7.6% higher than yesterday and 13.4% higher 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. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bullish contrarian trading bias.

See how shifts in GBP/USD retail positioning are impacting trend- Learn more about sentiment!

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Relevant GBP/USD Data Releases

GBP/USD Economic Calendar

Economic Calendar - latest economic developments and upcoming event risk. Learn more about how we Trade the News in our Free Guide!

Previous Weekly Technical Charts

Learn how to Trade with Confidence in our Free Trading Guide

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

Follow Michael on Twitter @MBForex