The British Pound is down nearly 1.4% from the monthly high as a shakeup in the UK parliament fueled ongoing concerns regarding the Brexit conditions. Despite the decline, price continues to trade just above a long-term, critical support confluence and IF prices are heading higher, Cable needs to hold these lows. Here are the updated targets and invalidation levels that matter for GBP/USD heading into the close of the week. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
GBP/USD Daily Price Chart
Technical Outlook: In my most recent Weekly Technical Perspective on the British Pound, we highlighted how GBP/USD had failed multiple attempts to break below a key support confluence around ~1.3164. The rebound off pitchfork support failed at the upper parallel (red) but the pullback continues to trade just above this key support zone.
IF Sterling has turned the corner, we’ll want to see a weekly close above this threshold. Daily resistance remains steady at 1.3311– a close above this shifts the focus towards the median-line and more significant resistance at 1.3495. A break lower risks substantial losses for the Pound with such a scenario targeting the lower parallel / October lows at 1.3027.
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GBP/USD 120min Price Chart
Notes: A closer look at price action sees Cable still trading within the weekly opening range. It’s the battle of the monthly opens with the immediate range in focus between 1.3180-1.3290. On a slide lower, 1.3164 and 1.3127 are levels of interest for intraday price exhaustion but watch the close. A topside breach shift the focus towards subsequent resistance objectives at 1.3362 and 1.3450.
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Bottom line: Sterling is trading just above BIG weekly support and IF prices are heading higher, losses should be limited by 1.3127. From a trading standpoint, I’m looking for exhaustion / long-entries on a drop towards the highlighted support targets with a breach above 1.3290 needed to get things going.
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GBP/USD Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-long GBP/USD- the ratio stands at +1.93 (65.9% of traders are long) – bearishreading
- Traders have remained net-long since April 20th; price has moved 6.2% lower since then
- Long positions are 0.8% higher than yesterday but 9.4% lower from last week
- Short positions are 2.9% lower than yesterday and 10.6% 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. Traders are more net-long than yesterday but less net-long from last week and the combination of current positioning and recent changes gives us a further mixed GBP/USD trading bias from a sentiment standpoint.
See how shifts in GBP/USD retail positioning are impacting trend- Learn more about sentiment!
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– Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex or contact him at firstname.lastname@example.org