GBP/USD Talking Points:
- The British Pound continues to rally after what had become a rough month of October. November has, so far, brought a change in tonality as buyers have continued to push over the past week, helping the pair to recover a large portion of prior October losses.
- A fairly hawkish Bank of England is likely contributing to a portion of this topside run, as that meeting took place on November 1st, right around the time that GBP/USD solidified its bottom. But Brexit remains of a concern, and prices will likely remain volatile as pushed in either direction by headline flow.
- Quarterly Forecasts have just been updated, and the Q4 forecast for GBP/USD is available from the DailyFX Trading Guides Page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.
Want to see how retail traders are currently trading GBP/USD? Click here for GBP/USD Sentiment.
British Pound Jumps After Brutal Second-Half of October
It’s been a vigorous start to November for the British Pound as the currency has spent the first week of the new month clawing back a significant chunk of prior October losses. While much of last month was doom and gloom for the British Pound, November has so far brought a very different change-of-tone. After testing below the 1.2700 handle in the final days of October, a strong topside push has seen prices in GBP/USD jump above the 1.3000 level. After a bit of resistance at 1.3000 last Thursday and Friday, buyers have continued to drive-higher in the fresh week and are now finding a bit of resistance off of 1.3164, which is the 50% marker of the 2016-2018 bullish move in the pair.
GBP/USD Four-Hour Price Chart: Strong October Down-Trend Followed by Strong November Up-Trend
Chart prepared by James Stanley
Looming just above current price action is another zone of resistance potential, as the September and October swing highs rest at 1.3299 and 1.3258, respectively. A trend-line projection drawn around those highs shows up around the 1.3200 level, meaning that there are multiple reasons for sellers to show up over the next 150 pips-higher on the chart, regardless of whether it’s to manage-off long positions or to trigger fresh shorts. This could be a difficult area to look to for bullish continuation, but it does open the possibility of a higher-low support test where bulls can show just how motivated they really are; and that can point to continuation potential and whether or not the pair can finally put in a lasting move of strength.
GBP/USD Eight-Hour Price Chart: Nearing Swath of Resistance
Chart prepared by James Stanley
GBP/USD Longer-Term Strategy
Despite the consistency of this week-long jump, traders would rightfully be cautious of instituting trend or momentum strategies on the pair given the current backdrop. The two final weeks of October saw a smooth down-trend take place until support came into play around the 1.2700 area, and that yielded to a bullish trend that’s been even more consistent. Nonetheless, prices remain bound by prior highs and lows, thereby making the prospect of longer-term strategy a bit more problematic. A test above the 1.3300 area could begin to re-open the door for longer-term strategies of strength, targeting re-tests of 1.3500.
GBP/USD Weekly Price Chart
Chart prepared by James Stanley
GBP/USD Near-Term Strategy
On a shorter-term basis, bullish potential remains if buyers are able to hold up higher-low support around the 1.3000 handle. RSI on the four-hour chart remains in overbought territory, and this could spell a backdrop for a pause in the trend as bulls may have pushed a little too far, a little too fast.
On the underside of price action are two areas of interest for higher-low support, taken from a Fibonacci retracement drawn from the prior down-trend. The 61.8% retracement of that move rests at 1.3043, and this level caught both resistance last Friday and support and a bit of support on Tuesday. This could be looked at as an aggressive support level for bullish strategies. A little deeper is a zone that runs from the 50% marker of that move up to the 1.3000 psychological level. A show of support here could open the door to bullish strategies with stops investigated below the past Friday swing-low at 1.2949.
GBP/USD Four-Hour Price Chart
Chart prepared by James Stanley
To read more:
Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.
Forex Trading Resources
DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.
If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.
--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
