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GBP/USD Technical Analysis: Pound to Resume 12-Year Decline?

GBP/USD Technical Analysis: Pound to Resume 12-Year Decline?

Ilya Spivak, Head Strategist, APAC

GBP/USD TECHNICAL ANALYSIS – TALKING POINTS:

  • British Pound may be ready to resume 12-year downtrend vs. US Dollar
  • Possible top formation signaled by Bearish Engulfing candlestick pattern
  • Daily close below neckline support sought to confirm initial breakdown

The British Pound may be on the cusp of resuming a downtrend in play against the US Dollar for over 12 years. The weekly chart reveals a dramatic Bearish Engulfing candlestick pattern produced at the intersection of falling trendline resistance and a horizontal barrier capping the upside since mid-September 2018, located in the 1.3300-81 area. This may prove to mark a top, ratifying a gloomy fundamental backdrop.

British Pound vs US Dollar price chart - weekly

GBP/USD weekly chart created with TradingView

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Zooming in to the daily chart, the makings of a reversal might be taking shape. Prices have broken past support traced along swing highs establishing the rise from early September 2019, lading atop a neckline limiting progress lower since November. A daily close below that seems likely to open the door for initial downside follow-through targeting the 1.2763-84 inflection region.

GBP/USD Technical Analysis: Pound to Resume 12-Year Decline?

GBP/USD daily chart created with TradingView

Neutralizing immediate selling pressure probably requires a breach and close above steep falling resistance extending down from the December 13 high, now squarely at the 1.31 figure. Invaliding the broader case for long-term topping probably needs the bulls to show greater conviction however. Securing a foothold above 1.3381 would go a long way in that direction.

GBP/USD TRADER SENTIMENT

GBP/USD BULLISH
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Change in Longs Shorts OI
Daily -17% 36% 13%
Weekly -36% 43% 4%
What does it mean for price action?
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GBP/USD TRADING RESOURCES

--- Written by Ilya Spivak, Currency Strategist for 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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