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GBP/USD Price Outlook: British Pound Probes Critical Support

GBP/USD Price Outlook: British Pound Probes Critical Support

Rich Dvorak, Analyst

BRITISH POUND WEEKLY TECHNICAL FORECAST – NEUTRAL

  • The British Pound weakened sharply against the US Dollar last week
  • GBP/USD dropped 244-pips and breached its 200-day moving average
  • Sterling bulls might defend critical support near the 1.36-price level
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GBP/USD price action faced heavy selling pressure last week. Broad-based US Dollar strength exacerbated Sterling weakness and drove the cable nearly 250-pips lower on balance. The British Pound fell out of favor versus other key FX peers like the Euro and Yen as well. GBP/JPY sank over 240-pips while EUR/GBP jumped 82-pips. Sterling bulls were able to find solace in GBP/AUD and GBP/CAD, however, as commodity currencies hemorrhaged. This all seemed to track a noticeable deterioration in market sentiment and appetite for risk.

GBP/USD PRICE CHART: DAILY TIME FRAME (24 MARCH TO 20 AUGUST 2021)

GBPUSD Price Chart British Pound to US Dollar Technical Forecast

Chart by @RichDvorakFX created using TradingView

That said, lingering risk aversion, in addition to Fed taper speculation, threaten to keep GBP/USD price action bogged down. Not to mention, after breaching its 200-day simple moving average last week, the Pound-Dollar could continue struggling below this key technical barrier. GBP/USD might similarly face headwinds from the descending trendline. Also, as indicated by the MACD, bearish momentum seems to be accelerating.GBP/USD is starting to look a bit oversold, though, to be fair. This is suggested by the relative strength index.

Potential for mean-reversion back higher is similarly hinted at by GBP/USD price action trading below its bottom Bollinger Band. On that note, the Pound-Dollar might find some buoyancy near current levels with technical support around the 1.3600-handle likely serving as a formidable layer of defense. This zone of confluent support is underpinned by the monthly lows notched in February and July as well as the 23.6% Fibonacci retracement level of the cable’s March 2020 to June 2021 trading range. Invalidating this support level exposes year-to-date lows near the 1.3450-price level.

-- Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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