GBP/USD Technical Analysis: Look for the Pullback to Get Long

• Cable rally testing monthly range highs- constructive above 1.2360
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GBPUSD Daily

Earlier this week we noted that cable had, “Cable responded to the 50% retracement of the March advance at 1.2362 this week with the rebound now approaching initial resistance targets. The broader focus remains weighted to the topside while above 1.23 / the lower parallel (blue) with a breach above the monthly open needed to validate a more meaningful reversal targeting confluence resistance at the 200-day moving average at ~1.2630s & key resistance at 1.2675-1.2706.”

The pair is now testing resistance at the monthly open and our outlook remains unchanged heading into the extended holiday weekend. I’d feel comfortable raising bullish invalidation to 1.2363 at this point (now also represents the weekly opening range low).

GBPUSD 240min

The near-term focus at the open of the week was on a, “break of the 1.2362-1.2460 range with a breach targeting subsequent topside objectives at 1.2519, the monthly open at 1.2540 & 1.2570.” At this point the pair is at risk for near-term exhaustion in momentum after failing to hold above the monthly open and while we could see some pullback from here, from a trading standpoint I’ll favor fading weakness (buying pullbacks) while above 1.2410/22. A breach higher eyes subsequent topside objectives into key resistance at 1.2671-1.2706.

• A summary of IG Client Sentiment shows traders are net-short GBPUSD- the ratio stands at -1.21 (45.2% of traders are long)- weak bullish reading
• Long positions are 13.7% lower than yesterday and 15.5% lower from last week
• Short positions are 7.9% higher than yesterday and 9.0% higher from last week
• The recent flip to net-short positioning amid building falling long interest continues to offer a bullish bias for Sterling. Look for a sustained build in short exposure to further strengthen this signal.

What do retail traders’ buy/sell decisions hint about the Sterling trend? Find out here !

---Written by Michael Boutros, Currency Strategist with DailyFX

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