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Sterling Technical Forecast: GBP/USD Recovery at Risk - Pound Levels

Sterling Technical Forecast: GBP/USD Recovery at Risk - Pound Levels

Michael Boutros, Strategist

Sterling Technical Price Outlook: GBP/USD Weekly Trade Levels

  • Sterling technical trade level update – Weekly Chart
  • GBP/USD recovery vulnerable while below yearly high-week close
  • Resistance at 1.4024, bearish invalidation 1.4155 - Support 1.3794, 1.3675 key

The British Pound snapped a three-week losing streak against the US Dollar with GBP/USD up 0.87% in early US trade on Friday. Despite the recovery, Sterling remains vulnerable after turning from technical resistance and the battle lines are drawn heading into the close of the June trade. 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 Sterling technical setup and more.

Sterling Price Chart - GBP/USD Weekly

Sterling Technical Forecast: GBP/USD Recovery at Risk - Pound Levels

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

Notes:In last month’s Sterling Weekly Price Outlook we warned that the GBP/USD, “rally may be vulnerable here into resistance at the objective yearly highs – from a trading standpoint, a good zone to reduce long-exposure / raise protective stops.” The resistance zone in focus was 1.4236-1.4303- a region defined by the 2018 high close, the objective yearly / February highs and the 50% retracement of the 2014 decline. Cable registered a high at 1.4252 into the June open before marking an outside-day reversal with the subsequent decline plummeting more than 3.2% off the highs.

A proposed descending pitchfork formation extending off the yearly highs highlights near-term support at the 78.6% Fibonacci retracement of the April rally at 1.3794 with key support at 1.3670/75 – a break / weekly close below this level would be needed to suggest a larger trend reversal is underway towards the 2017 high-week close at 1.3494. Initial resistance back at the 2018 high-week close / 61.8% Fibonacci retracement of the February decline at 1.4000/24with a breach above the yearly high-week reversal close at 1.4155 needed to fuel another challenge at the yearly highs.

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 recovery remains vulnerable while within this formation. From at trading standpoint, look for possible topside exhaustion below 1.4155 with a break / close sub-1.3675 needed to fuel the next leg lower in price. Ultimately, a close above the 1.43-handle is needed to put the bulls back in control. I’ll publish an 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

Sterling Technical Forecast: GBP/USD Recovery at Risk - Pound Levels
  • A summary of IG Client Sentiment shows traders are net-long GBP/USD - the ratio stands at +1.13 (52.95% of traders are long) – weak bearish reading
  • Long positions are6.73% higher than yesterday and 7.83% lower from last week
  • Short positions are9.84% higher than yesterday and 23.12% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current GBP/USD price trend may soon reverse higher despite the fact traders remain net-long.


Key UK / US Economic Data Releases

Sterling Technical Forecast: GBP/USD Recovery at Risk - Pound Levels

Economic Calendar - latest economic developments and upcoming event risk.

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.