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Sterling Price Outlook: British Pound Bounce May be on Borrowed Time

Sterling Price Outlook: British Pound Bounce May be on Borrowed Time

2020-03-04 19:30:00
Michael Boutros, Strategist
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Sterling Technical Price Outlook: GBP/USD Weekly Trade Levels

  • Sterling technical trade level update – Weekly Chart
  • GBP/USD rebounds off 2019 yearly open support
  • British Pound broader risk remains lower sub- 1.3078 – Key support 1.2553/82

The British Pound is trading higher against the US Dollar this week with Sterling up 0.25% into the close of London trade on Tuesday. The move comes on the back of a rebound off technical support and while the recovery may have more upside, the broader risk remains for a deeper correction before resumption of the late-2019 advance. These are the updated targets and invalidation levels that matter on the GBP/USD price charts. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Cable trade setup and more.

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Sterling Price Chart - GBP/USD Weekly

Sterling Price Chart - GBP/USD Weekly

Chart Prepared by Michael Boutros, Technical Strategist; GBP/USD on Tradingview

Notes: In our last Sterling Weekly Price Outlook we noted that the GBP/USD was , “trading within a contractionary range just above confluence uptrend support at the 1.29-handle..” A weekly close below 1.29 into the open of February trade has seen Cable continue to slide with the decline testing 2019 yearly open support at 1.2754 into the close of February trade- looking for a pivot here.

A break lower exposes subsequent support objectives at the 100% extension at 1.2674 and the 61.8% retracement / 2018 low-week close at 1.2553/82- both regions of interest for possible downside exhaustion IF reached. Initial weekly resistance stands with the median-line (currently ~1.2990s) with bearish invalidation set to the 2020 high-week close at 1.3078 – a breach / close above this threshold would be needed to mark resumption with such a scenario eying the objective yearly open at 1.3250.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Bottom Line: Sterling is rebounding off lateral support and IF price is indeed heading lower, near-term advances should be capped by the median line. From a trading standpoint, looking for downside exhaustion / possible entry on a break lower towards uptrend support. Ultimately, we’re looking for evidence of a near-term low to fade for a larger recovery. Review my latest Sterling Price Outlook for a closer look at the near-term GBP/USD technical trade levels.

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Sterling Trader Sentiment - GBP/USD Price Chart

Sterling Trader Sentiment - GBP/USD Price Chart - British Pound vs US Dollar Outook- Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-long GBP/USD - the ratio stands at +2.22 (68.99% of traders are long) – bearish reading
  • Long positions are4.53% lower than yesterday and 6.03% lower from last week
  • Short positions are3.31% higher than yesterday and 13.41% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall. Traders are less net-long than yesterday but more net-long from last week and the combination of current positioning and recent changes gives us a further mixed GBP/USD trading bias from a sentiment standpoint.
GBP/USD MIXED
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -13% -8% -11%
Weekly -23% -32% -27%
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--- Written by Michael Boutros, Technical Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex

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