GBP/USD & EUR/GBP PRICE OUTLOOK: STERLING DROPS AGAINST DOLLAR AS EURO-POUND MAINTAINS RANGE
- The Pound Sterling traded mixed on balance last week but could decline going forward
- GBP/USD weakened sharply over the last three trading sessions in a potential reversal attempt
- EUR/GBP price action has ricocheted between key technical barrier as upward pressure builds
The British Pound (GBP) dropped last week against major peers like the US Dollar (USD), Euro (EUR), and Swiss Franc (CHF), but the Sterling strengthened relative to other key counterparts such as the Australian Dollar (AUD) and Canadian Dollar (CAD). Notably, spot GBP/USD spiked lower by about 250-pips, or 2%, from its 10 June swing high, while EUR/GBP price action edged steadily higher week-on-week to gain roughly 60-pips, or 0.7%.
GBP/USD PRICE CHART: DAILY TIME FRAME (28 FEB TO 12 JUN 2020)
Chart created by @RichDvorakFX with TradingView
GBP/USD prices now trade roughly flat month-to-date as the US Dollar rises from the dead and attempts to claw back recent downside. The Pound-Dollar pivoted sharply lower last week following a rejection of the 1.2800 price level, which corresponded with a Bollinger Band squeeze and invalidation of the ascending channel developed since mid-May.
Spot GBP/USD also failed to find footing above its 200-day moving average as the US Dollar basket (DXY) snapped higher. Pound Sterling performance against its USD peer contributes 11.9% to the total US Dollar Index return. On that note, GBP/USD price action could face additional headwinds considering the US Dollar might extend its recovery with volatility on the rise.
| Change in | Longs | Shorts | OI |
| Daily | 3% | 0% | 2% |
| Weekly | 12% | -6% | 7% |
EUR/GBP PRICE CHART: DAILY TIME FRAME (06 FEB TO 12 JUN 2020)
EUR/GBP bounced off the 0.8900-price level again early last week as spot prices ping-pong back and forth between the two highlighted technical barriers. The support and resistance zones that have kept EUR/GBP price action relatively contained looks underpinned by the mid-point and 38.2% Fibonacci retracement of the FX pair’s year-to-date trading range. EUR/GBP prices have also continued to coil between bullish and bearish trendlines extended through both a series of lower highs and higher lows.
| Change in | Longs | Shorts | OI |
| Daily | -4% | 10% | 4% |
| Weekly | -15% | 40% | 10% |
That said, the impending MACD crossover likely serves as a welcomed technical development for Pound Sterling bears, and has potential to help propel spot EUR/GBP to fresh monthly highs if upward momentum gains pace. Topping the 29 May intraday swing high might open up the door for EUR/GBP bulls to target confluence near the 23.6% Fibonacci retracement level and 0.9200-handle.
-- Written by Rich Dvorak, Analyst for DailyFX.com
Connect with @RichDvorakFX on Twitter for real-time market insight
