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In this series we scale-back and take a look at the broader technical picture to gain a bit more perspective on where we are in trend. The British Pound has responded to a long-term weekly technical support confluence on the back to today’s Bank of England (BoE) interest rate decision and the focus is on validation of a larger reversal in price. Here are the key 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: The British Pound has continued to trade within the confines of the descending pitchfork formation highlighted in our previous GBP/USD Technical Perspective, with prices rebounding off a confluence support zone this week around ~1.3164. This region is defined by the 50% retracement of the post-Brexit advance and converges on the lower median-line parallel & basic trendline support extending off the 2017 lows. So was that the low?

The verdict is still - but as noted in this month’s Sterling Scalp Report, this sure is a good spot to look. Interim resistance stands with the 50-line, currently around ~1.3350s backed by more significant resistance at 1.3470/94 where the 52-week moving average converges on the 2017 high-week close and the median-line. A breach there would be needed to suggest a more significant low is in place.

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

Bottom line: Sterling is attempting to post and outside-day reversal off confluence support today and we’re looking for follow-through on this rebound. From a trading standpoint, I’ll favor fading weakness against today’s low for now. A break lower would invalidate the reversal play with such a scenario targeting subsequent support objectives at the October lows at 1.3027 and the key 61.8% Fibonacci retracement at 1.2877.

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GBP/USD IG Client Positioning

GBP/USD Trader Sentiment
  • A summary of IG Client Sentiment shows traders are net-long GBP/USD- the ratio stands at +2.25 (69.2% of traders are long) –bearishreading
  • Traders have remained net-long since April 20th; price has moved 6.6% lower since then
  • The percentage of traders net-long Sterling is now its lowest since Jun 14
  • Long positions are 9.0% lower than yesterday and 2.3% higher from last week
  • Short positions are9.0% higher than yesterday and 13.5% higher 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 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!

Relevant GBP/USD Data Releases

GBP/USD Economic Calendar

Economic Calendar– for the latest economic developments and upcoming event risk

Previous Weekly Technical Perspectives

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

Follow Michael on Twitter @MBForex or contact him at mboutros@dailyfx.com