GBP/USD Technical Outlook: Sterling Threatens Larger Price Reversal

GBP/USD Technical Outlook: Sterling Threatens Larger Price Reversal

The British Pound posted an outside-day reversal off slope support last week, shifting our near-term focus higher in price. The recovery has now pulled back from the monthly open and IF prices are indeed heading higher, this decline may offer near-term entries on the long-side. These are the updated intraday targets & invalidations levels that matter for GBP/USD.

GBP/USD Daily Price Chart

GBP/USD Daily Price Chart

Technical Outlook: In last week’s Technical Perspective on the British Pound, we highlighted a confluence support zone in GBP/USD around ~1.3164, “This region is defined by the 50% retracement of the post-Brexit advance and converges on the lower median-line parallel & basic trendline support extending off the 2017 lows.” We noted that IF prices were going to recover- this would be a, “good spot” with daily RSI divergence further highlighting the risk for a near-term recovery.

Sterling rallied more than 1.6% off the lows last week before pulling back from monthly open resistance at 1.3290. A rally surpassing the 61.8% retracement of the monthly range at 1.3330 would be needed to suggest a more significant low is in place and validate a breakout with such a scenario targeting confluence resistance into the 1.35-handle. A downside break of this range keeps the broader short-bias in play targeting the lower parallel / October low at 1.3027.

New to Forex Trading? Get started with this Free Beginners Guide

GBP/USD 240min Price Chart

GBP/USD 240min Price Chart

Notes: A closer look at Sterling price action highlights last week’s reversal off descending pitchfork support with price closing just below the monthly open at 1.3290– note that this level also represents the objective weekly opening-range high. A breach above this threshold keeps the focus higher targeting subsequent resistance objectives at 1.3330, the trendline confluence around 1.3360 and the 76.4% retracement at 1.3384. Interim support rests at 1.3203/08 with our near-term bullish invalidation level steady at 1.3164.

Why does the average trader lose? Avoid these Mistakes in your trading

Bottom line: The near-term risk is for a larger recovery on this rebound with our focus higher while above 1.3164. From a trading standpoint, I’ll favor fading weakness targeting the median-line – a breach / close above would be needed to keep the long-bias viable targeting 1.3450 and a more significant resistance confluence at 1.3495-1.3504 (2017 high-day close / 2018 open).

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

GBP/USD IG Client Positioning

GBP/USD Trader Positioning

  • A summary of IG Client Sentiment shows traders are net-long the British Pound (GBP/USD)- the ratio stands at +2.34 (70.1% of traders are long) – bearishreading
  • Traders have remained net-long since April 20th ; price has moved 6.6% lower since then
  • Long positions are 2.9% lower than yesterday and 1.9% higher from last week
  • Short positions are4.5% higher than yesterday and 10.5% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Sterling 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 GBP/USD price trend may soon reverse higher despite the fact traders remain net-long.

See how shifts in GBP/USD retail positioning are impacting trend- Learn more about sentiment!

Relevant GBP/USD Data Releases

GBP/USD Economic Calendar

Economic Calendarlatest economic developments and upcoming event risk

Other Setups in Play

– Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex or contact him at

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published.