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Sterling Price Outlook: GBP/USD Bulls Buckle-Up for Fed, BoE, NFP

Sterling Price Outlook: GBP/USD Bulls Buckle-Up for Fed, BoE, NFP

2019-05-01 14:30:00
Michael Boutros, Strategist
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The British Pound has rallied more than 1.5% against the US Dollar since last week’s low after reversing of long-term trend support. These are the updated targets and invalidation levels that matter on the GBP/USD charts heading into this week’s FOMC / BoE interest rate decisions. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

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GBP/USD Daily Price Chart

GBP/USD Price Chart - British Pound vs US Dollar Daily - Sterling rate

Technical Outlook: In my latest GBP/USD Price Outlook we noted that Sterling was testing, “BIG slope support here and leaves the immediate short-bias vulnerable while above today’s low (4/25).” That low held with Cable breaking through confluence resistance early in the week at the 1.30-handle – note the three-point trigger break in daily RSI.

Interim support now rests back at 1.30 backed by the 200-day moving average at 1.2957. Ultimately a break below the weekly opening-range low / 1.2902 would be needed to shift the focus back to the downside (broader bullish invalidation). Subsequent topside resistance objectives eyed at the 1.3123 backed by the 61.8% retracement at 1.3184- look for a bigger reaction there IF reached.

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GBP/USD 240min Price Chart

GBP/USD Price Chart - British Pound vs US Dollar 240minute- Sterling Rate

Notes: A closer look at price action shows Sterling testing parallel resistance ahead of the US open after breaking through highlighted resistance yesterday. Initial support rests with the April open at 1.3036 backed closely by 1.30 and 1.2957 – both levels of interest for possible exhaustion / long-entries. A topside breach keeps the focus on subsequent objectives at 1.3123 and 1.3184.

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Bottom line: Sterling has reversed of Major trend support with the advance breaking through confluence resistance today- IF prices are heading higher, losses should be limited to the 200-day moving average. From a trading standpoint, we’ll favor fading weakness while above the weekly open targeting a breach above 1.31. Keep in mind we have the FOMC interest rate decision on tap later this afternoon with the BoE’s Super Thursday and Non-Farm Payrolls (NFP) looming- stay nimble! Review my latest GBP/USD Weekly Price Outlook for a look at the longer-term technical picture.

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

GBP/USD Trader Sentiment

GBP/USD Trader Sentiment - British Pound vs US Dollar Price Chart - Sterling Positioning
  • A summary of IG Client Sentiment shows traders are net-long GBP/USD- the ratio stands at +1.68 (62.6% of traders are long) – bearishreading
  • Traders have remained net-short since March 26th; price has moved 1.0% lower since then
  • Long positions are14.4% lower than yesterday and 17.7% lower from last week
  • Short positions are29.5% higher than yesterday and 51.5% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Sterling prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current GBP/USD price trend may soon reverse higher despite the fact traders remain net-long.

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

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Relevant UK / US Economic Data Releases

UK / US Economic Calendar - GBP/USD Event Risk

Economic Calendar - latest economic developments and upcoming event risk.

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- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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