British Pound Technical Forecast: GBP/USD, GBP/JPY, EUR/GBP
British Pound, GBP, Sterling Technical Forecast: Bullish
- GBP/USD put in yet another test at the 1.4000 handle, with bulls pulling back and prices turning around, helped along by the Bank of England rate decision on Thursday.
- Longer-term GBP/USD and GBP/JPY remain in strong trends, and EUR/GBP has stalled after an aggressive sell-off drove the pair to fresh yearly lows.
- The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.
The British Pound backed down this week after riveting uptrends helped to drive the currency to fresh two year highs against both the US Dollar and the Japanese Yen. Against the Euro, the trend was clear coming into March but has since stalled with a key Fibonacci level coming into play.
In the US Dollar, the pair remains in what’s been a very strong up-trend since October of last year, represented by a trend channel on the Daily chart below. Notice the recent support tests on the bottom portion of that channel, highlighting the recent pullback that I’ll look at in deeper detail below; but take into account the fact that the US Dollar has been relatively strong of recent, and the fact that this up-trend has remained in the channel with the consistency has is somewhat encouraging, particularly for those looking at a return of US Dollar weakness as the Q2 open nears.
GBP/USD Daily Price Chart
GBP/USD: Cable Caught at the Big Fig
On a shorter-term basis, the pair had come into the FOMC rate decision with breakout potential. I had looked at a couple of different resistance variants ahead of the announcement, with particular focus on the 1.4000 big figure that had already seen four separate tests in the previous three weeks. Each of those had failed; and when USD weakness showed after the FOMC rate decision, GBP/USD took a trip back up to 1.4000 for yet another test. But, similar to the prior four instances, with this one getting a bit of a push from the Bank of England, bulls failed and prices pulled back.
At this point, on a shorter-term basis, GBP/USD remains in the same range that’s built since the March open. This can keep the focus for the pair on topside, looking for bullish continuation of the longer-term trend investigated above.
GBP/USD Technical Forecast: Bullish
GBP/USD Hourly Price Chart
Chart prepared by James Stanley; GBPUSD on Tradingview
GBP/JPY: The Parabola Curves
While the bullish trend in GBP/USD has been very consistent going back to last year, of recent, the bullish trend in GBP/JPY has been even more aggressive, taking on a near-parabolic like shape as a potent combo of GBP strength and JPY weakness have propelled the pair to two-year-highs.
This week, however, looks as though it will be the first since the January open in which GBP/JPY has went down on a weekly basis. Also from the weekly chart – the RSI indicator has grown to its most overbought since 2014, highlighting just how one-sided this trend has become.
This week saw the 152.50 psychological level come into play and prices pulled back to find support at a Fibonacci level plotting around 150.87. This can keep the door open for short-term bullish momentum strategies, but for those with a longer-term basis, taking a step back given those extreme overbought readings may be prudent until matters settle a bit. As such, the forecast for next week will be set to neutral as we may be at an important pivot in the trend given the upcoming quarter-end after a very strong start to 2021 trade.
GBP/JPY Technical Forecast: Neutral
GBP/JPY Weekly Price Chart
EUR/GBP Attempts to Set Footing After Tumultuous Sell-Off
The normally sleepy pair of EUR/GBP has been abnormally active so far in early 2021 trade, driven by a growing divide between the UK and Europe around vaccine progress. The pair did finally start to probe some support a few weeks ago that’s since helped to hold the lows, and this plots around the 78.6% Fibonacci retracement of last year’s major move.
But sellers have remained very persistent, and this opens up a couple of interesting possibilities given that support is still, as of this writing, in place. First, traders can approach the setup with breakout potential in mind, looking for a breach of Fibonacci support to lead into a possibly new bearish trend. Or, alternatively, a pullback to find resistance around a prior area of support could re-open the door for bearish trend strategies. This could be sought around the 61.8% Fibonacci retracement of that same major move that had helped to set support in early-February.
This can keep the focus for the pair on the bearish side, looking for the British Pound to continue to outperform the Euro.
Technical Forecast for EUR/GBP: Bearish
EUR/GBP Daily Price Chart
--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
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