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Sterling Price Outlook: British Pound Recovery Faces First Test

Sterling Price Outlook: British Pound Recovery Faces First Test

Michael Boutros, Strategist

Sterling Price Outlook: British Pound Recovery Faces First Test

Sterling prices rebounded off downtrend support last week with the rally now targeting initial resistance targets. IF broken, the recent move in price would suggest that a larger recovery / advance is underway in the Pound. Here These are the updated targets and invalidation levels that matter on the GBP/USD weekly price chart. Review my latestWeekly Strategy Webinar for an in-depth breakdown of this gold price setup and more.

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Sterling Price Chart - GBP/USD Weekly

Sterling Price Chart

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

Notes:In last week’s GBP/USD PriceOutlook we noted that Sterling was, “testing down-trend support here and leaves the immediate short-bias vulnerable into the start of next week.” The British Pound is up more than 2% off the monthly / yearly lows with the advance now targeting more significant downtrend resistance.

The median-line of the descending pitchfork formation we’ve been tracking off the late-2018 / 2019 highs converges on the 2016/2017 slope line around ~1.2315 with critical resistance steady at 1.2374-1.2433- a breach / close above this region would be needed to suggest a more significant low is in place. Initial support rests with the low-week close at 1.2144 – weakness beyond this point would once gain look to target the 2016 post-Brexit low.

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

Bottom line:The Sterling price recovery remains viable with the advance now targeting initial topside objectives. From a trading standpoint, look to reduce long-exposure / lower protective stops on a move towards downtrend resistance. Pullbacks should be limited to 1.2144 IF prices are indeed heading higher with a breach targeting 1.2374-1.2433 key pivot zone- watch the weekly close here. Review my latest GBP/USD Price Outlook for a closer look at the near-term GBP/USD technical trading levels.

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Sterling Trader Sentiment (GBP/USD)

GBPUSD Client Sentiment
  • A summary of IG Client Sentiment shows traders are net-long GBP/USD - the ratio stands at +2.5 (71.5% of traders are long) – bearish reading
  • Traders have remained net-long since May 6th; price has moved 5.6% lower since then
  • Long positions are10.0% lower than yesterday and 6.4% lower from last week
  • Short positions are 6.4% higher than yesterday and 10.0% 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 & compared with last week. Recent changes in positioning 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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Previous Weekly Technical Charts

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--- Written by Michael Boutros, Technical 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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