British Pound Technical Forecast: GBP/USD Recovery - Fed Face-off
British Pound Technical Price Outlook: GBP/USD Weekly Trade Levels
- Sterling technical trade level update – Weekly Chart
- GBP/USD rebound off downtrend support threatens test of downtrend resistance
- Weekly resistance, 1.2166, 1.2348, 1.2520– Support 1.1861 (key), 1.1650, 1.1414
The British Pound is attempting to mount a second weekly advance against the US Dollar after rebounding sharply off technical support early in the month. While the potential for further near-term gains remains, the recovery keeps price within the yearly downtrend and the focus is on a possible stretch towards resistance levels just higher for guidance. These are the updated targets and invalidation levels that matter on the GBP/USD weekly chart heading into the Fed rate decision / close of July. Review my latest Strategy Webinar for an in-depth breakdown of this Sterling technical setup and more.
British Pound Price Chart - GBP/USD Weekly
Notes: In my last British PoundWeekly Technical Forecast we noted that the GBP/USD was approaching a key, “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.” Sterling continued to register a low at 1.1760 on July 14th (amid building weekly divergence) before rebounding off downtrend support (red channel) with GBP/USD rallying nearly 2.8% off the lows. The focus is on this bear-market recovery with the FOMC interest rate decision on tap heading into the close of the month.
Initial weekly resistance eyed at the May 2020 low-week close at 1.2166 backed by the 23.6% Fibonacci retracement of the 2021 decline / late-May weekly reversal-close at 1.2348. Broader bearish invalidation now lowered to the highlighted region around the 38.2% retracement at 1.2520. A break / close below the low-week close at 1.1861 is needed to mark resumption of the broader downtrend with such a scenario exposing subsequent support objectives at the 2020 close low (1.1650) and the 2020 lows at 1.1414.
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Bottom Line: The British Pound has rebounded off downtrend support and leaves room for further near-term gains within the broader decline– rallies should be limited to yearly channel resistance IF price is still indeed heading lower on this stretch. From a trading standpoint, be on the lookout for possible topside exhaustion ahead of 1.2348 with a weekly close below 1.1861 needed to clear the way for the next leg lower in price. Keep in mind the FOMC interest rate decision is on tap this week followed by US GDP and Inflation (PCE) data with the close of the month upon us- expect some volatility, tread lightly and stay nimble.
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 +2.25 (69.27% of traders are long) – typically bearish reading
- Long positions are 1.29% higher than yesterday and 1.16% lower from last week
- Short positions are 33.54% higher than yesterday and 19.45% higher 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 and compared with last week. From a sentiment standpoint, the recent changes in positioning warn that the current GBP/USD price trend may soon reverse higher despite the fact traders remain net-long.
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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.