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British Pound (GBP) Price Outlook: GBP/USD Approaching Key Support Levels

British Pound (GBP) Price Outlook: GBP/USD Approaching Key Support Levels

Martin Essex, MSTA,
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GBP price, news and analysis:

  • GBP/USD continues to look weak as a strong US Dollar outperforms most other currencies.
  • However, trendline support and the 1.33 level could at least delay further losses.

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GBP/USD to test support

GBP/USD has hit its lowest level since just before Christmas last year and there are few signs yet that its slide against a rampant US Dollar is over. However, there is a chance now that its decline could be halted, perhaps only briefly, by some important support levels just below the current price.

GBP/USD Price Chart, Daily Timeframe (December 2, 2020 – November 25, 2021)

Latest GBP/USD price chart

Source: IG (You can click on it for a larger image)

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In particular, as the chart above shows, it is now close to a trendline connecting the lower lows in place since mid-April and which sits currently around 1.3290. That’s just below the 1.33 “round number” that could also provide some support ahead of the December 2020 lows at 1.3188 and then 1.3134.

From a fundamental perspective there is nothing new to move the Pound ahead of the December 16 meeting of the Bank of England’s monetary policy committee, which is widely expected to increase UK interest rates.

That means movements in GBP/USD will be largely dictated by the US Dollar, which is benefiting from indications that the Federal Reserve will taper its aid for the markets and raise interest rates sooner than once expected as the climb in US consumer prices appears to be accelerating.

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As for sentiment, IG client positioning data continue to send out a bearish contrarian signal. The retail trader data show 74.24% of GBP/USD traders are net-long, with the ratio of traders long to short at 2.88 to 1. The number of traders net-long is 1.89% higher than yesterday and 8.91% higher than last week, while the number of traders net-short is 3.78% lower than yesterday and 13.67% lower than last week.

Here at DailyFX, we typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD may continue to fall.Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bearish contrarian trading bias.

-- Written by Martin Essex, Analyst

Feel free to contact me on Twitter @MartinSEssex

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