- British Pound looking for support in early January trade- constructive while above 1.29
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Sterling is virtually unchanged against the US Dollar this week with GBP/USD paring early-week gains into the close. Although the broader outlook remains constructive for the pound, a reversal off key technical resistance in December risks a larger pullback before resumption. These are the updated targets and invalidation levels that matter on the GBP/USD weekly price chart into the January open.
Sterling Price Chart - GBP/USD Weekly
Chart Prepared by Michael Boutros, Technical Strategist; GBP/USD on Tradingview
Notes:In our last Sterling Weekly Price Outlook we noted a constructive GBP/USD outlook while above 1.2582 with a breach above 1.3203 needed to fuel the next leg higher in the British Pound. A breakout in early December saw price register a high at 1.3515 before pulling back sharply with Sterling threatening a weekly doji on Friday.
The move keeps the British Pound within the confines of an ascending pitchfork formation extending off the 2019 lows with initial weekly support now eyed at 1.2905/21- weakness beyond this threshold would threaten a larger correction into the yearly open with such a scenario exposing 1.2754 and broader bullish invalidation at 1.2553/82. Initial resistance stands at 1.3335 backed subsequent topside objectives at the 61.8% retracement / 2017 high-week close at 1.3453/94 and 1.3675.
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Bottom line:The Sterling price breakout failed at a major technical resistance zone last month and the focus is on a pullback into the start of the year. From a trading standpoint, 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. I’ll publish an updated Sterling Price Outlook once we get further clarity on the near-term GBP/USD technical trade levels.
Sterling Trader Sentiment (GBP/USD)
- A summary of IG Client Sentiment shows traders are net-long GBP/USD - the ratio stands at +1.48 (59.74% of traders are long) – bearish reading
- Long positions are8.26% higher than yesterday and 13.51% lower from last week
- Short positions are 9.32% lower than yesterday and 10.80% 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 more net-long than yesterday but less 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.
| Change in | Longs | Shorts | OI |
| Daily | 9% | 2% | 7% |
| Weekly | 1% | -9% | -2% |
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Previous Weekly Technical Charts
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- US Dollar Index (DXY)
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- Canadian Dollar (USD/CAD)
- Australian Dollar (AUD/USD)
- Crude Oil (WTI)
--- Written by Michael Boutros, Technical Currency Strategist with DailyFX
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