British Pound Technical Forecast: GBP/USD, GBP/JPY, EUR/GBP
British Pound Technical Forecast: Neutral
- It was a mean reversion type of weak for GBP/USD, with prices trading within the range produced by the prior week.
- Matters were a bit more volatile in GBP/JPY, where an early-week drubbing found support at a big spot on the chart, after which buyers pushed for a strong Friday reversal.
- 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.
It was another back-and-forth week in GBP/USD, with price action respecting last week’s range and showing the heavy hand of mean reversion. After dropping Tuesday through Thursday, a strong push on Friday erased those mid-week losses for prices to put in a gain on the weekly chart. GBP/JPY, however, was a bit more volatile as an early-week spill ran into a key zone of support, after which bulls went to work on Thursday and Friday to create a sharp reversal from that area. EUR/GBP threatened a wedge break on Thursday, helped along by the ECB; but that momentum fell flat and much of the move was erased ahead of the weekly close.
The more enthralling GBP market for last week, GBP/JPY, was seeing drive from risk-off themes earlier in the week as Japanese Yen strength showed very visibly. This was, in part, helped along by the continued fall in US yields, as looked at on Thursday. This continued a theme that started on June 24th, when GBP/JPY found resistance on the underside of a trendline that had previously been supporting price for most of 2021 trade. That took place around the 155 psychological level and after that resistance inflection, bears were large and in charge, pushing all the way down to a Fibonacci level plotted around 150.87. That led into a support bounce on Thursday, followed by an aggressive bullish push on Friday.
GBP/JPY Daily Price Chart
On a shorter-term basis, that bullish run may carry some continuation potential. But, at this point, with price action having just made a lower-low, traders should look for additional confirmation of strength in the short-term trend. This can be accomplished with a higher-high (above 153.17) followed by a higher-low, and n the below chart, I look at a couple of possible areas for this to show up.
GBP/JPY Two-Hour Price Chart
GBP/USD: Swinging with the USD, Reversal Potential in Cable
GBP/USD found some support this week at the psychological level of 1.3750. It wasn’t without a bit of struggle, however, as a stern sell-off Tuesday-Thursday saw sellers driving. But, as USD began to pullback, GBP/USD started to push-higher and similar, albeit to a lesser degree, bulls made a noticeable mark during Friday trade.
As discussed previously, GBP/USD may be an attractive venue for themes of USD-weakness, and if we do see continued mean reversion in FX markets, the topside of GBP/USD can remain an attractive venue for that backdrop.
The next major zone of resistance beyond the 1.3900 swing high is at the 1.4000 psychological level, which offered a stern reaction when it last came into play in late-June.
GBP/USD Four-Hour Price Chart
EUR/GBP Threatens Wedge Break – Backs Down
There was a bit of excitement in the normally quiet pair of EUR/GBP this week. Around the Thursday ECB rate decision, prices pushed outside of a falling wedge formation, which is often approached with the aim of bullish reversals. Price action hurriedly returned back inside of the wedge, with prices pinned down near an area of longer-term support. But, for those that are looking for strategies around GBP-weakness, this may be an area to follow as there’s a couple of different technical items pointing to a possible topside breach.
Not only do we have the build of a falling wedge along with a sticky spot of support, there’s also been a longer-term tendency towards higher-lows in the pair, evidenced by the red trendline below.
EUR/GBP Daily Price Chart
--- Written by James Stanley, Senior Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.