News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Sterling Price Outlook: British Pound Sinks into Support– GBP Levels

Sterling Price Outlook: British Pound Sinks into Support– GBP Levels

Michael Boutros, Strategist

Sterling has been on the defensive against the US Dollar since the start of the year with GBP/USD trading lower by more than 3.7% off the 2019 highs. The decline takes price near multi-month uptrend support and we’re looking for a reaction heading into next week. These are the updated targets and invalidation levels that matter on the GBP/USD price charts. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this British Pound trade setup and more.

Sterling Price Chart – GBP/USD Daily

Sterling Price Chart - GBP/USD Daily - British Pound vs US Dollar Trade Outlook - Technical Forecast

Chart Prepared by Michael Boutros, Technical Strategist; GBP/USD on Tradingview

Technical Outlook: In my latest Sterling Weekly Price Outlook we noted that we were, “looking for a larger setback towards confluence support for guidance – IF price is indeed heading higher on this stretch, losses should be limited to the 1.29-handle. Ultimately, we’re looking to fade weakness for a breach to fresh yearly highs.” GBP/USD is down more than 2% off the late-December highs with price continuing to trade within the confines of an ascending pitchfork formation extending off the October / December highs.

Sterling dropped into initial daily support yesterday at 1.3013- a break below this threshold would risk a larger setback towards broader bullish invitation at 1.2907/20 – a region defined by the 38.2% retracement of the September advance and the 61.8% extension of the December decline. Monthly open resistance stands at 1.3253 with a breach / close above 1.3284 needed to mark resumption targeting 1.3363 and the 1.35-handle.

Sterling Price Chart – GBP/USD 240min

Sterling Price Chart - GBP/USD 240min - British Pound vs US Dollar Trade Outlook - Technical Forecast

Notes: A closer look at Sterling price action shows GBP/USD holding below basic trendline resistance extending off the highs with the decline now trading just above near-term confluence support at 1.2990-1.3013 – note that the lower parallel converges on this region into the close / open of next week. A break there would expose 1.2907/20 – look for a bigger reaction there IF reached. Initial resistance stands at the highlighted trendline confluence around 1.3140s with a breach of the weekly opening-range highs shifting the focus back towards 1.3253 and the 61.8% retracement / March high-day close at 1.3281-1.3310.

Bottom line: The Sterling pullback is trading just above multi-month uptrend support and the immediate focus is on a reaction down here. From a trading standpoint, a good spot to reduce short-exposure / lower protective stops. Be on the lookout for downside exhaustion heading into the lower parallel for possible entries IF price is indeed heading higher.

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

Sterling Trader Sentiment – GBP/USD Price Chart

Sterling Trader Sentiment - GBP/USD Price Chart - British Pound vs US Dollar Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-long GBP/USD - the ratio stands at +1.5 (60.05% of traders are long) – bearish reading
  • Long positions are1.27% lower than yesterday and 8.96% higher from last week
  • Short positions are13.24% higher than yesterday and 2.14% 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. Yet traders are less net-long than yesterday but more net-long from last week and the combination of current positioning and recent changes gives us a further mixed GBP/USD trading bias from a sentiment standpoint.

---

Key UK / US Data Releases

GBP/USD Economic Calendar - Sterling / US Dollar Key Data releases - British Pound Technical Forecast

Economic Calendar - latest economic developments and upcoming event risk.

Active Trade Setups

- 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.

DISCLOSURES