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British Pound Technical Analysis: GBP/USD, GBP/JPY, EUR/GBP

British Pound Technical Analysis: GBP/USD, GBP/JPY, EUR/GBP

Daniel Moss, Analyst
What's on this page

British Pound, GBP/USD, GBP/JPY, EUR/GBP, IGCS – Talking Points:

  • Descending Channel break hints at further gains for GBP/USD.
  • Ascending Channel continuing to guide GBP/JPY higher.
  • EUR/GBP poised to extend losses after diving back below key support.
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The British Pound is positioned to gain ground against its major counterparts in the near term, as a series of bullish technical patterns take shape across multiple GBP crosses. Here are the key levels to watch for GBP/USD, GBP/JPY and EUR/GBP in the weeks ahead.

GBP/USD Daily Chart – Descending Channel Break Hints at Gains

Chart prepared by Daniel Moss, created with Tradingview

The British Pound looks set to extend recent gains against the US Dollar, as prices breaches Descending Triangle resistance and remains constructively positioned above psychological support at 1.3900.

Bullish moving average stacking, in tandem with the RSI and MACD tracking above their respective neutral midpoints, suggests that the path of least resistance is higher.

A retest of the monthly high (1.4009) looks likely in the near term, with a break above needed to carve a path for the exchange rate to challenge the yearly high (1.4241).

Alternatively, a daily close below 1.3900 could neutralize short-term buying pressure and precipitate a short-term pullback towards the 21-EMA (1.3841).

The IG Client Sentiment Report shows 45.07% of traders are net-long with the ratio of traders short to long at 1.22 to 1. The number of traders net-long is 15.79% higher than yesterday and 32.45% lower from last week, while the number of traders net-short is 14.19% lower than yesterday and 26.79% higher 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.

Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed GBP/USD trading bias.

GBP/JPY Daily Chart – Ascending Channel Nurturing Uptrend

Chart prepared by Daniel Moss, created with Tradingview

GBP also appears poised to climb higher against the Japanese Yen in the coming days, as prices continue to track within the confines of an Ascending Channel and hold above the psychologically imposing 150.00 handle.

Once again, with the RSI and MACD tracking firmly above their neutral midpoints, bullish momentum seems to be building and could drive price higher in the short term.

A daily close back above the 8-EMA (150.55) probably opens the door to a retest of the April 20 high (151.98), with a convincing push above bringing the yearly high (153.41) into the crosshairs.

However, if Ascending Channel support and the 34-EMA (150.18) gives way, a pullback to the 78.6% Fibonacci (148.51) could be on the cards.

The IG Client Sentiment Report shows 48.09% of traders are net-long with the ratio of traders short to long at 1.08 to 1. The number of traders net-long is 1.80% higher than yesterday and 12.85% lower from last week, while the number of traders net-short is 0.54% lower than yesterday and 0.27% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/JPY prices may continue to rise.

Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed GBP/JPY trading bias.

EUR/GBP Daily Chart – Descending Pitchfork Guiding Price Lower

Chart prepared by Daniel Moss, created with Tradingview

The technical outlook for EUR/GBP rates continues to point to further downside, as prices break back below the trend-defining 55-EMA (0.8660) and Andrews’ Pitchfork median line.

Indeed, with RSI and MACD appearing to rollover in a bearish fashion, the primary downtrend extending from the September 2020 high may reassert itself in the coming weeks.

Slipping back below the 21-EMA (0.8624) likely triggers a push back towards the April 19 low (0.8589), with a convincing push below carving a path to challenge the yearly low (0.8472).

However, if prices can clamber back above the 55-EMA (0.8660), a retest of the monthly high (0.8719) could be on offer.

The IG Client Sentiment Report shows 50.44% of traders are net-long with the ratio of traders long to short at 1.02 to 1. The number of traders net-long is 0.86% lower than yesterday and 5.69% higher from last week, while the number of traders net-short is 12.08% higher than yesterday and 6.39% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/GBP prices may continue to fall.

Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current EUR/GBP price trend may soon reverse higher despite the fact traders remain net-long.

-- Written by Daniel Moss, Analyst for DailyFX

Follow me on Twitter @DanielGMoss

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