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Sterling Price Outlook: Pound Recovery Testing Key Resistance Hurdle

Sterling Price Outlook: Pound Recovery Testing Key Resistance Hurdle

2020-04-09 16:00:00
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 rally holding below Fibonacci resistance at 1.2470- focus on the weekly close
  • Broader Cable outlook remains constructive while above 1.1950

The British Pound rallied more than 1.2% against the US Dollar this week with Sterling trading just below Fibonacci resistance on Thursday. The Cable recovery may be vulnerable into this threshold near-term but the focus remains higher while above the post-Brexit lows. These are the updated targets and invalidation levels that matter on the GBP/USD weekly technical chart. 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 - British Pound vs US Dollar Trade Outlook - Cable Technical Forecast

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 sell-off was, “approaching downtrend technical confluence around 1.1446- that low held with cable posting a rally of more than 9% before pulling back from the 50% retracement of the December decline at 1.2470. Price has continued to hold just below this threshold with Sterling threatening a weekly reversal into the close of a shortened holiday session – the immediate focus is on a reaction up here.

A topside breach would expose subsequent resistance objectives at the 2018 low-week close at 1.2582 and a key technical confluence at 1.2717/54- a region defined by the 61.8% retracement and the 2019 yearly open. A close below the 2019 low-week close at 1.2278 would risk a larger setback towards 1.2076 and the post-Brexit low at 1.1950- both levels of interest for possible exhaustion IF reached. Boarder bullish invalidation rests with the 61.8% retracement at 1.1823.

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

Bottom Line: The Sterling reversal is now testing initial resistance hurdles at 1.2470. From a trading standpoint, look for a reaction into the close of the week with a breach above needed to keep the immediate long-bias in play (would require an outside weekly reversal). Keep an eye out for downside exhaustion while above 1.1950 early next week IF this holds into the close. I’ll publish and updated Sterling Price Outlook once we get further clarity on 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 Trade Outlook
  • A summary of IG Client Sentiment shows traders are net-long GBP/USD - the ratio stands at +1.14 (53.28% of traders are long) – neutral reading
  • Long positions are0.72% lower than yesterday and 13.94% higher from last week
  • Short positions are3.94% higher than yesterday and 3.91% 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. Yet 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 1% -1% 0%
Weekly -11% 57% 11%
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Key UK / US Data Releases

UK / US Data Releases - GBP/USD Event Risk - British Pound / US Dollar Economic Calendar

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

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