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Sterling Technical Price Outlook: British Pound Reacts at Resistance

Sterling Technical Price Outlook: British Pound Reacts at Resistance

2020-06-16 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 near-term price breakout faltering ahead of critical resistance zone
  • British Pound long-side remains vulnerable while below 1.2753- key support 1.2341

The British Pound rallied more than 1.4% against the US Dollar into the start of the week with GBP/USD breaching near-term downtrend resistance. The move pares more than half the losses sustained last week but keeps Sterling below a critical resistance barrier in price. 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: Sterling rallied more than 6% off the May lows with the rally responding to a critical resistance range last week at 1.2710/54- a region defined by the 61.8% retracement of the December decline and the objective 2019 yearly open. Cable pared a portion of this pullback early in the week but continues to trade just below this key threshold and leaves the broader May rally vulnerable while below.

Daily support rests with the post-Brexit low-week close at 1.2433 backed by broader bullish invalidation at the monthly open / 61.8% retracement at 1.2341/58 – a break / close below this threshold would suggest a more significant near-term high was registered last week. Look for an exhaustion low ahead of this threshold IF price is indeed heading higher with a break / close above 1.2754 needed to mark resumption towards 1.2840 and the upper parallel.

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 breaking above descending channel resistance early in the week with the advance turning today just pips from the 1.2710/54 resistance zone. The immediate advance remains vulnerable below this threshold. Initial support at the May open at 1.2593 backed by the weekly open at 1.2513 and key support at 1.2433/45- and area of interest for possible downside exhaustion IF reached.

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Bottom line: The recent Sterling recovery is vulnerable on the back of this stretch while below 1.2710/53. From a trading standpoint, a good spot to reduce long-exposure / raise protective stops- be on the lookout for topside exhaustion below this mark. Ultimately a larger recovery may offer more favorable entries closer to uptrend support - watch for a reaction on a move towards 1.2433/45 for guidance IF reached. 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 Trade Outlook - Cable Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-short GBP/USD - the ratio stands at -1.12 (47.24% of traders are long) – weak bullish reading
  • Long positions are10.60% higher than yesterday and 3.68% higher from last week
  • Short positions are3.80% lower than yesterday and 18.93% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/USD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBP/USD price trend may soon reverse lower despite the fact traders remain net-short.
GBP/USD BULLISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -1% 8% 4%
Weekly -17% 55% 11%
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Key UK / US Data Releases

Key UK / US Data Releases - GBP/USD Economic Calendar - Sterling Event Risk

Economic Calendar - latest economic developments and upcoming event risk.

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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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