Sterling technical forecast: GBP / USD rally at risk

Sterling Price Technical Outlook: GBP / USD Weekly Trade Levels

  • Sterling Trade Technical Level Update – Weekly Chart
  • GBP / USD vulnerable recovery below annual high week close
  • Resistance at 1.4024, bearish invalidation 1.4155 – Support for key 1.3794, 1.3675

The British pound ended a three-week losing streak against the US dollar with the GBP / USD up 0.87% in early US trading on Friday. Despite the rally, the pound remains vulnerable after turning away from technical resistance and the battle lines are drawn before the June trade close. It is the updated goals and invalidation levels that rely on the GBP /USD weekly technical table. See again my last Strategy webinar for an in-depth analysis of this sterling technique configuration and more.

British Pound Price Chart – Weekly GBP / USD

Graphic prepared by Michel Boutros, technical strategist; GBP / USD on Tradingview

Notes:Last month Weekly Course Outlook in Pounds Sterling we warned that the GBP / USD, “the rally could be vulnerable here to resistance to higher annual targets – from a trade perspective a good area to reduce long exposures / increase protective stops”. the resistance the focus area was 1.4236-1.4303– a region defined by the close of the 2018 highs, the annual / February targets and the 50% retracement of the 2014 drop. Cable recorded a high at 1.4252 at the June open before marking a reversal out of the day, the subsequent decline dropping more than 3.2% from highs.

A proposed descent fork training extending annual summits short term highlights Support at 78.6% Fibonacci retracement of the rally from April to 1.3794 with key support to 1.3670 / 75 – a weekly break / close below this level would be required to suggest that a larger trend reversal is underway towards the week-high close of 2017 at 1.3494. Initial resistance back at the close of the week high 2018 / 61.8% Fibonacci retracement of the decline from February to 1.4000 / 24with a breach above the high week annual dreamfence at 1.4155 necessary to fuel another challenge at the annual summits.

For a full description of Michael’s trading strategy, see his Fundamentals of Technical Analysis Series on Bbuild a Tranking Sstrategy

Conclusion:The rally in the pound remains vulnerable within this formation. From a trading perspective, look for possible exhaustion of the upper part below 1.4155 with a break / close below 1.3675 needed to fuel the next lower step in price. Ultimately, a close above the 1.43 grip is needed to regain control of the bulls. I will post an update British Pound Price Outlook once we have more clarity on the short term GBP / USD technical trading levels.

Sterling Trader Sentiment – GBP / USD Price Chart

Sterling technical forecast: GBP / USD rally at risk - Sterling levels

  • A summary of Sentiment of IG customers shows traders are long on GBP / USD – ratio stands at +1.13 (52.95% of traders are long) – low bearish reading
  • Long positions are6.73% more than yesterday and 7.83% less than last week
  • Short positions are9.84% more than yesterday and 23.12% more than last week
  • We generally take a contrarian view of crowd sentiment, and the fact that traders are net long suggests that GBP / USD prices may continue to fall. However, traders are shorter than yesterday and compared to last week. Recent changes in feeling warn that the current GBP / USD price trend may soon reverse to the upside despite traders staying net long.

Key economic data releases in UK and US

Sterling technical forecast: GBP / USD rally at risk - Sterling levels

Economic calendarthe latest economic developments and the risks associated with future events.

Previous weekly technical charts

— Written by Michel Boutros, Technical currency strategist with DailyFX

To pursue Michael on Twitter @MBForex

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