British Pound Outlook – GBP/USD Looking to Hold Support
GBP/USD Technical Highlights:
- GBP/USD backing into support, watch for it to hold
- Congestion pattern (wedge) could be on the build
GBP/USD has gone into a fairly choppy mode of trading lately following the excitement leading up to and just after the general election last month. For now, Cable appears to be undergoing a digestion phase that if continues may help lead to another run later on.
But before getting ahead of ourselves, some work needs to be done on the charts. Support is currently being tested, a line that arrives via several lows over the past couple of months. It’s a clear line of support that offers traders a potentially good risk/reward spot, whether establishing a short-term or more intermediate-term position.
A hold here and rally could continue to see price action contract towards a fully developed wedge in the next couple of weeks. Ultimately, this would be seen as making for a strong bullish case given the primary trend since bottoming up in August and September.
If trend support should fail and price break below the December 23, 12904 level, then look for the 12800 area or worse, down to 12687, the 200-day, to come into play. A breakdown wouldn’t turn the trend entirely back in favor of shorts, but it would go a ways towards strengthening their case for broader weakness.
For now, looking to play support for what it is – support. From there, depending on price action, further maneuvers can be made to either add to a long exposure, or cut in favor of lower prices.
GBP/USD Daily Chart (on support)
GBP/USD 4-hr Chart (wedge could be forming)
***Updates will be provided on the above thoughts and others in the trading/technical outlook webinars held at 1030 GMT on Tuesday and Friday. If you are looking for ideas and feedback on how to improve your overall approach to trading, join me on Thursday each week for the Becoming a Better Trader webinar series.
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.