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British Pound Technical Forecast: GBP/USD, GBP/JPY, EUR/GBP, GBP/CAD

British Pound Technical Forecast: GBP/USD, GBP/JPY, EUR/GBP, GBP/CAD

2020-02-01 23:00:00
James Stanley, Currency Strategist
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GBP, British Pound, Sterling Talking Points

  • This week’s BoE rate decision helped to bring strength back into the British Pound.
  • Continuation themes took hold on Friday, which was ‘Brexit day.’
  • With a new BoE Governor set to take over, numerous questions remain around forward-looking Bank of England policy.

GBP/USD Bullish Break of Bull Pennant Formation

It was a comeback type of showing for the British Pound as the early part of the week saw the currency under pressure while the latter part of the week brought GBP bulls back to the table. The Bank of England rate decision loomed large and appeared to be an important turning point. The BoE held rates flat despite an approximate 50% chance of a cut; but in his final rate decision as the BoE Governor Mark Carney also discussed falling growth forecasts over the next few years, and that helped to moderate the bullish drive after the announcement of no rate move, albeit temporarily. Also of importance, Friday of this week marked ‘Brexit day,’ and the UK is now formally leaving the EU.

GBP/USD – Bullish Break Out of Bull Pennant Formation

The net response from this week’s price action was a strong bullish move in the GBP/USD pair, helped along by a drubbing in the US Dollar after this week’s FOMC rate decision. While GBP/USD spent the first few days of the week grinding around the psychological 1.3000 level, buyers came into the mix around the BoE rate decision on Thursday to take control of matters; and that continued through Friday trade as GBP/USD moved up for a test of the 1.3187 Fibonacci level, which is the 23.6% retracement of the 2014-2016 sell-off in the pair.

For next week, the technical forecast will be set to bullish in GBP/USD, looking for a continuation of this week’s breakout.

GBP/USD Technical Forecast: Bullish

GBP/USD Eight-Hour Price Chart

GBPUSD 8-Hour Price Chart

Chart prepared by James Stanley; GBPUSD on Tradingview

GBP/JPY Bounces After Support Grind

GBP/JPY opened the week by gapping lower, and sellers continued to swing until the 141.58 support level came into play on Tuesday. And after two days of grind, combined with a quick test below around the BoE rate decision on Thursday, buyers came back with aggression to re-take control of the matter. The primary difference here from the GBP/USD look above was the Friday theme of continuation. The anti-risk Yen traded heavy as Coronavirus fears continued to permeate the marketplace, and this keeps GBP/JPY as a bit less bullish than the pennant break in GBP/USD.

Given a hold of resistance around a prior support swing, the bullish backdrop may not be as bright in GBP/JPY and the forecast for next week will be set to neutral.

GBP/JPY Technical Forecast: Neutral

GBP/JPY Four-Hour Price Chart

GBPJPY Four Hour Price Chart

Chart prepared by James Stanley; GBPJPY on Tradingview

EUR/GBP Reverts to Support

The week produced a net loss in EUR/GBP despite strength showing on both Monday and Tuesday, which continued a support bounce that had started last Friday. Given the incursion of British Pound strength that played through on Thursday and Friday, the pair put in a small net loss for the week, with sellers pulling back around last week’s swing low.

A break below the .8383 level could potentially re-open the door for bearish strategies, targeting a re-test of the .8277 low that was set in December; but given a lack of trend-side momentum, the forecast will be set to neutral for next week in EUR/GBP.

EUR/GBP Technical Forecast: Neutral

EUR/GBP Daily Price Chart

EURGBP Daily Price Chart

Chart prepared by James Stanley; EURGBP on Tradingview

GBP/CAD Launches Higher with Potential for Continuation

Given the late-week strength in the British Pound and the continuation of weakness in the Canadian Dollar, GBP/CAD had a very bullish showing this week as price action continued its ascent from a key area of longer-term Fibonacci support. The price of 1.6955 is the 23.6% retracement of the 2016 major move in the pair, and this level saw four weeks of tests to open this year until last week’s CAD weakness could start to take-over.

GBP/CAD Weekly Price Chart

Weekly GBPCAD Price Chart

Chart prepared by James Stanley; GBPCAD on Tradingview

Given the outsized response this week, combined with prevailing macro trends, there could be scope for continuation in this move. For next week, the forecast will be set to bullish on the pair, and a prior point of swing-high resistance can be re-purposed in that search for higher-low support. This plots around the 1.7274 level, and a pullback combined with a show of support at this zone can re-open the door for bullish trend approaches.

Technical Forecast for GBP/CAD: Bullish

GBP/CAD Daily Price Chart

GBPCAD Daily Price Chart

Chart prepared by James Stanley; GBPCAD on Tradingview

--- 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.

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