British Pound Technical Forecast: Bullish
- The British Pound put in gains against both the US Dollar and the Euro but was slightly weaker against the Japanese Yen.
- In all three markets, Sterling strength has been the big recent driver of recent as one of the more clear trends on the FX side of the equation.
It was another week of strength for the British Pound as the currency gained against both the Euro and the US Dollar as trends continued in both markets. In GBP/JPY, we’re looking at a doji on the weekly as a bit of back-and-forth developed after three really strong weeks that saw as much as 500 pips added to the spot price of the pair.
In the major pair of GBP/USD, buyers made a strong push towards a fresh three-year-high. Standing in the way, however, was the swing-high from last February which comes in around 1.4243.
It’s not all bullish indications, however, as a familiar trendline came back into the equation and made its presence known throughout this week. The underside of the bullish trend channel that guided the pair higher from last September into this March came in yet again to offer resistance. A similar such instance happened a month ago when that trendline was confluent with the 1.4000 psychological level, and that led to a 200 pip retracement. But support cauterized around 1.3800 and bulls drove over the past few weeks, coming very close to another fresh breakout.
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For next week, the more attractive scenario for bulls would be a pullback to support around the 1.4000 handle, after which a show of support could re-open the door for bullish trend strategies. Alternatively, breakout strategies can open up upon prints of fresh highs, but given the proximity of the 1.4243 high to the 1.4250 psychological level, traders may want to a lot for a bit of room in the effort of preventing getting caught on a false breakout.
The technical forecast will be set to bullish for the week ahead in GBP/USD.
GBP/USD Daily Price Chart
Chart prepared by James Stanley; GBPUSD on Tradingview
GBP/JPY Grinds Sub-155, Can Bulls Take It?
GBP/JPY has shown similar strength as GBP/USD; in both cases a strong Sterling is being meshed with a currency showing varying degrees of weakness.
In GBP/JPY, the pair made a strong but unsuccessful attempt to mount above the 155.00 level this week, which allowed for some fairly significant grind to show on shorter time frames. Perhaps the most disconcerting aspect for bulls was lower-highs that printed this week after the Tuesday high of 154.84 was set. This highlights the fact that the bullish trend may be a bit long in the tooth, and due for a pullback before bulls might finally be able to take out that 155.00 level.
Similar to the above with GBP/USD, breakout logic could keep the door open for topside plays but, similar to GBP/USD at the 1.4250 spot, traders may want to add some buffer room above the psychological level in the effort of avoiding getting wicked into a false breakout.
On the trend side of the pair, the area around 153.50 seems key, and a hold of support there could allow for concentrated risk on bullish trend approaches.
The forecast for GBP/JPY will be set to bullish for the week ahead.
GBP/JPY Four-Hour Price Chart
Chart prepared by James Stanley; GBPJPY on Tradingview
EUR/GBP Grasps for Support After Rough Start to the Year
EUR/GBP was not friendly to Euro bulls in the first few months of 2021 trade. A combination of Euro weakness and Sterling strength drove the pair to a fresh yearly low last month, with a bounce showing after an incursion on the .8500 handle.
Since then, price action built into a range from mid-April into early-May trade, at which point Sterling bulls took another swing. But, they were thwarted at a key spot on the chart, around the 76.4% Fibonacci retracement of last year’s major move.
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That price came into play last week which led into a mild bounce. This week saw continued grind between bulls and bears as neither were able to take concerted control of the pair. Another Fibonacci level came into play this week, the 14.4% retracement of the December to April major move, and this helped to mark the week’s low on Tuesday and again on Friday.
This gives on the appearance of a possible recovery theme as sellers still have been unable to make much of a mark after the April pullback. And while the trend is still bearish, or bullish for GBP given its role as the counter-currency in the pair, there may simply be more attractive areas for GBP-bulls in the week ahead.
The technical forecast for EUR/GBP will be set to neutral.
EUR/GBP Daily Price Chart
Chart prepared by James Stanley; EURGBP on Tradingview
--- Written by James Stanley, Senior Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
