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British Pound May Fall vs. US Dollar, Yen After Turn at Key Chart Levels

British Pound May Fall vs. US Dollar, Yen After Turn at Key Chart Levels

Ilya Spivak, Head Strategist, APAC

BRITISH POUND, US DOLLAR, JAPANESE YEN, GBP/USD, GBP/JPY – TALKING POINTS:

  • British Pound down with 2yr Gilt yields despite strong UK Q2 GDP data
  • GBP/USD may be resuming downtrend after counter-trend support break
  • GBP/JPY taking aim below 152.00 figure after range support is breached

The British Pound tracked broadly lower against its major counterparts in the wake of robust second-quarter GDP figures. Output grew 22.2 percent in the three months to June 2021 compared with the same period in 2020, marking the fastest on-year growth rate in nearly seven decades.

Nevertheless, Sterling fell after a bit of digestion following the release. Prices tracked lower alongside front-end UK government bond yields, implying that traders did not envision the growth surge as likely to influence a hawkish pivot in Bank of England monetary policy.

That probably speaks to the central bank’s somewhat dismissive rhetoric about the recent inflationary upswing – which it has pinned on temporary factors – as well as a limited scope for growth to keep pace with the Q2 surge. The boost from initial reopening following Covid-inspired lockdowns may be mostly exhausted.

GBP/USD, GBP/JPY TECHNICAL ANALYSIS

From here, GBP/USD seem so have re-engaged the downtrend extending from June highs with a break of upward-sloping support guiding the late-July upswing. Sellers are now testing a support block in the 1.3729-98 zone, with a daily close below its lower bound setting the stage for a foray below the 1.3600 figure.

Immediate resistance is in the 1.3879-1.3910 area. A rebound that brings prices back above that barrier and confirms the breach on a daily closing basis may beckon another challenge of the 1.4000 handle. Securing a foothold above that appears to be a prerequisite for neutralizing selling pressure in earnest.

British Pound vs US Dollar - GBP/USD daily chart

GBP/USD daily chart created with TradingView

Meanwhile, GBP/JPY looks to have recoiled from downward-sloping trend resistance guiding prices lower since late May. Slipping below range support at 152.55 appears to have opened the way for the pair to retest support in the 151.15-29 inflection zone.

Immediate resistance lines up at 153.49, a barrier that has capped upside progress since mid-July. A break above that confirmed with daily close may sap sellers’ confidence and allow for a rise into 156.08-61 region, a would-be Double Top marked by swing highs in February 2018 and May of this year.

British Pound vs Japanese Yen - GBP/JPY 8-hour chart

GBP/JPY 8-hour chart created with TradingView

BRITISH POUND TRADING RESOURCES

--- Written by Ilya Spivak, Head Strategist, APAC at DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

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

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