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Sterling Price Outlook: Pound Rally Stalls into Uptrend Resistance

Sterling Price Outlook: Pound Rally Stalls into Uptrend Resistance

Michael Boutros, Strategist

Sterling Technical Price Outlook: GBP/USD Weekly Trade Levels

  • Sterling technical trade level update – Weekly Chart
  • GBP/USD in consolidation within August range- just below uptrend resistance
  • Constructive while above 1.2481 – Critical resistance 1.3311/35

The British Pound contracted within the August opening-range this week with Sterling poised to close 0.4% high against the US Dollar. The move keeps Cable just below uptrend resistance with key technical objectives lined up just higher and while the broader outlook remains constructive, the immediate advance may be vulnerable IF this slope holds into the close. These are the updated targets and invalidation levels that matter on the GBP/USD weekly technical chart. Review my latest Strategy Webinar for an in-depth breakdown of this Cable trade setup and more.

Sterling Price Chart - GBP/USD Weekly

Sterling Price Chart

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

Notes:In my last Sterling Weekly Price Outlook we noted that the GBP/USD was ranging, “within a multi-week ascending channel – just below key resistance… with a breach above the June high needed to keep the long-bias viable.” A topside breach / weekly close above key resistance at 1.2717/54 the following week fueled a leg higher in price with the advance stalling into channel resistance for the past three weeks.

The immediate focus is on a the weekly close with respect to 1.3070/78- a level defined by the 78.6% retracement of the December 2019 decline and the yearly high-week close. A close above keeps the long-bias viable heading into next week but critical resistance levels are eyed just higher at the objective yearly open / 61.8% retracement of the 2018 decline at 1.3245/50 and the 100% ext / 2019 high-week close at 1.3311/35 – both levels of interest for possible topside exhaustion IF reached. Key support1.2717/54 with bullish invalidation now raised to 1.2481.

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 breakout may be vulnerable here near-term while below channel resistance. From a trading standpoint, a good region to reduce long-exposure / raise protective stops - be on the lookout for possible topside exhaustion into these upcoming resistance targets – ultimately a larger pullback may offer more favorable opportunities closer to uptrend support with a breach above 1.3335 needed to unleash the next leg higher in Cable.I’ll publish and updated Sterling Price Outlook once we get further clarity on the near-term GBP/USD technical trade levels.

Sterling Trader Sentiment - GBP/USD Price Chart

Client Sentiment
  • A summary of IG Client Sentiment shows traders are net-short GBP/USD - the ratio stands at -1.95 (33.85% of traders are long) – bullish reading
  • Long positions are1.85% higher than yesterday and 0.21% lower from last week
  • Short positions are4.87% higher than yesterday and 3.43% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/USD prices may continue to rise. Yet traders are more net-short than yesterday but less net-short 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.

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Key UK/US Data releases

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Previous Weekly Technical Charts

--- 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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