British Pound Technical Forecast: GBP/USD Plunge Testing Key Support
British Pound Technical Price Outlook: GBP/USD Weekly Trade Levels
- Sterling technical trade level update – Weekly Chart
- GBP/USD outside-weekly reversal now testing key support- risk for price inflection
- Weekly resistance, 1.2166, 1.2261, 1.2481– Support 1.1950-1.2021 (Key), 1.1650, 1.16
The British Pound plunged more than 1% against the US Dollar into the start of the week with GBP/USD on the defensive on the heels of an outside-weekly reversal last week. The decline takes Cable into a critical support pivot we’ve been tracking for months and the focus is on possible inflection in the days ahead. These are the updated targets and invalidation levels that matter on the GBP/USD weekly chart heading into July.
British Pound Price Chart - GBP/USD Weekly
Notes: In my last British PoundWeekly Technical Forecast we noted that the GBP/USD, “rebound may have further upside potential here but we’re on the lookout for possible price inflection on a stretch towards 1.2754 IF reached. From a trading standpoint, look for an exhaustion high heading into the June open.” Sterling registered a high at 1.2617 on June 1st before turning lower with price plunging into a key support pivot at 1.1950-1.2021- a region defined by the 2016 / 2019 lows and the 78.6% retracement of the 2020 advance. This critical threshold has been tested three of the last four weeks and a weekly close below is needed to mark resumption of the broader downtrend.
A pivot below threatens significant losses for the Pound with such a scenario exposing the 2020 close low at 1.1650, the 1.16-handle and yearly channel support around 1.1450s- both levels of interest for possible downside exhaustion IF reached. Initial weekly resistance now eyed at the May 2020 low-week reversal close at 1.2166 backed closely by the May low-week close at 1.2261. Ultimately, a rally / close above the 23.6% Fibonacci retracement of the 2021 decline / late-May weekly reversal-close at 1.2480/85 would be needed to invalidate the broader downtrend.
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Bottom Line: The British Pound is testing a major support pivot into the start of the month and the focus is on possible price inflection off this mark. From a trading standpoint, a good zone to reduce portions of short-exposure / lower protective stops- rallies should be capped by monthly open resistance at -1.2173 IF price is indeed heading lower on this break. Ultimately, a pivot below this zone could see another bout of accelerated Sterling losses. Tread lightly into the monthly opening-range with US non-farm payrolls on tap this Friday. Buckle-up and stay tuned!
British Pound Trader Sentiment - GBP/USD Price Chart
- A summary of IG Client Sentiment shows traders are net-long GBP/USD - the ratio stands at +2.86 (65.95% of traders are long) – typically bearish reading
- Long positions are 0.15% higher than yesterday and 9.67% higher from last week
- Short positions are 5.55% higher than yesterday and 10.85% 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. The combination of current positioning and recent changes gives us a further mixed GBP/USD trading bias from a sentiment standpoint.
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--- Written by Michael Boutros, Technical Strategist with DailyFX
Follow Michael on Twitter @MBForex
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.