British Pound Price Outlook: GBP/USD Snaps Back to Support
British Pound Talking Points:
- Last week’s breakout in the British Pound continues to soften as worries of a No-Deal Brexit have come back into the equation.
- GBP/USD has moved down to a key support level which has so far helped to hold the lows.
GBP/USD Breakout Snaps Back
The bullish breakout in the British Pound is on its back foot as No-Deal Brexit fears have come back into the equation. Our own Martin Essex discussed this earlier this morning as UK Prime Minister Boris Johnson was set to amend the bill to withdraw the UK from the EU. This had a negative effect on the currency as the GBP/USD breakout snapped back to a key area of support around 1.3187, just a few trading days after the currency cauterized resistance at the 1.3500 psychological level.
The big question at this point is whether the bullish trend is over or just taking a break; and from the technical backdrop and given the size of the breakout, the topside of GBPUSD would likely remain as attractive unless or until the current sell-off worsens. The price of 1.3187 remains as interesting and this was looked at last Friday, just after the post-Election breakout took place. This is the 23.6% Fibonacci retracement of the 2014-2016 major move in GBP/USD, and this provided a bit of resistance to that bullish price action when the trend was moving-higher ahead of last Thursday’s elections. Also of interest on the long side is the fact that just below that level, at 1.3168, is the 50% marker of the recent bullish move, which also points to topside continuation potential should this zone of support hold.
GBP/USD Eight-Hour Price Chart
GBP/USD Longer-Term Backdrop
At this point, resistance at 1.3500 is taking on a similar feel as the test of a prior psychological level at 1.3000. That price came into play in October just after an 800+ pip breakout, stalling the bullish trend before a pullback began to show. And that 1.3000 resistance level held for about six weeks, until buyers pushed-above in early-December in anticipation of the upcoming election. But notable is the fact that this prior zone of resistance around the big figure has yet to be tested for support; so if the 1.3168-1.3187 zone does not help to hold the lows today, a deeper retracement may show with a support test off of that prior zone of resistance.
Should that take place, there’d be a short-term bearish trend at work encountering a big level of potential support, and at that point, short-term reversals could be looked at in the direction of the longer-term trend with the goal of bullish continuation.
GBP/USD Daily Price Chart
--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.