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Sterling Price Outlook: British Pound Breakout at Risk- GBP/USD Levels

Sterling Price Outlook: British Pound Breakout at Risk- GBP/USD Levels

2020-04-14 15:30:00
Michael Boutros, Strategist
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Sterling Technical Price Outlook: GBP/USD Trade Levels

  • Sterling technical trade level update – Daily & Intraday Charts
  • GBP/USD recovery testing downtrend resistance
  • British Pound long-side vulnerable into 1.27

The British Pound has rallied more than 10% against the US Dollar off the March lows with the rally taking Cable towards longer-term downtrend resistance. While the medium-term outlook remains constructive, the immediate advance may be vulnerable here as price approaches key technical resistance. 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 Daily

Sterling Price Chart - GBP/USD Daily - British Pound vs US Dollar Trade Outlook - Cable Technical Forecast

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

Technical Outlook: In my latest Sterling Price Outlook we noted that British Pound reversal was testing initial resistance hurdles into the close of the week with a topside breach exposing, “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.

Cable broke above the 61.8% retracement of the March range at 1.2518 with the rally taking out targets into 1.2582. The focus now is on a close with respect to the sliding parallel (magenta)- a close below would risk a near-term pullback in price. Broader bullish invalidation now raised to 1.2195 with a breach higher from here eyeing the 75% parallel (currently ~1.2670s) backed by critical resistance steady at 1.2717/54.

Sterling Price Chart – GBP/USD 120min

Sterling Price Chart - GBP/USD 120min - British Pound vs US Dollar Trade Outlook - Cable Technical Forecast

Notes: A closer look at Sterling price action shows GBP/USD trading within the confines of the ascending pitchfork formation with cable attempting to breach the 75% parallel today in New York. Topside resistance objectives are eyed at the highlighted slope confluence near ~1.2670s backed by 1.2710 and 1.2753- look for a more significant reaction there IF reached. Initial support rests at 1.2515 backed by the weekly open at 1.2461 and the post-Brexit low-week close at 1.2433- weakness beyond this zone would risk a larger correction with near-term bullish invalidation now set to 1.2328.

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Bottom line: The Sterling breakout is approaching downtrend resistance targets and leaves the immediate advance at risk heading into 1.2710/53. From a trading standpoint, look to reduce long-exposure / raise protective stops on a stretch towards the upper parallel- look for possible topside exhaustion there IF reached. Ultimately a larger pullback may offer more favorable entries closer to uptrend support. Review my latest British Pound Weekly Price Outlook for a closer look at the longer-term GBP/USD technical trade levels.

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

Sterling Trader Sentiment – GBP/USD Price Chart

Sterling Trader Sentiment - GBP/USD Price Chart - British Pound vs US Dollar Trader Positioning - Cable Trade Outlook
  • A summary of IG Client Sentiment shows traders are net-long GBP/USD - the ratio stands at +1.38 (58% of traders are long) – bearish reading
  • Long positions are2.36% higher than yesterday and 16.09% higher from last week
  • Short positions are1.81% higher than yesterday and 4.91% 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. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger GBP/USD-bearish contrarian 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 -5% 19% 3%
Weekly -11% -26% -18%
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- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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