The British Pound is down more than 2.5% from the yearly highs against the US Dollar with Sterling trading within the confines of a near-term consolidation pattern just above support. These are the updated targets and invalidation levels that matter on the GBP/USD charts as the Brexit saga continues. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
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GBP/USD Daily Price Chart
Technical Outlook: In my latest GBP/USD Weekly Technical Outlook we noted that the, “risk remains weighted to the downside heading into the close of the month / quarter but ultimately the broader outlook remains constructive while above yearly open support at 1.2754.” The threat remains for a deeper pullback within the confines of the uptrend with Sterling respecting the March opening-range into the start of 2Q – we’re looking for the break.
Daily support rests at 1.2975-1.3004 – a region defined by the 200-day moving average & the 61.8% retracement of the February advance. A break / close below this threshold would threaten a larger set-back towards the lower parallels. Initial resistance stands at the March open at 1.3262 backed by the median-line / July high at 1.3363 – a breach / close above would be needed to mark resumption.
GBP/USD 240min Price Chart
Notes: A closer look at price action shows Sterling trading within the confines of a consolidation formation just above confluence support at 1.2985-1.3004. A break below this threshold exposes subsequent support objectives at the 100-day moving average at ~1.2920 and the 100% extension at 1.2891– both levels of interest for possible exhaustion / long-entries IF reached. Initial resistance stands at 1.3157 with a breach above 1.3226 needed to shift the near-term focus back to the long-side targeting 1.3363.
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Bottom line: We’re looking for a break of this near-term consolidation in price with the broader risk weighted to the downside while below 1.3226 for now. From a trading standpoint, we’ll favor fading strength while within this channel formation – ultimately, a larger set-back may offer more favorable entries lower down near broader uptrend support. Keep in mind we’re in the first few days of the month / quarter with US Non-Farm Payrolls (NFP) on tap this Friday- tread lightly.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
GBP/USD Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-long GBP/USD- the ratio stands at +1.88 (65.3% of traders are long) – bearish reading
- Traders have remained net-long since March 26th; price has moved 1.2% lower since then
- Long positions are3.4% lower than yesterday and 33.1% higher from last week
- Short positions are 2.7% higher than yesterday and 19.2% 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. Yet, traders are less net-long than yesterday but more net-long from last week and the combination of current positioning& 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!
Relevant UK / US Economic Data Releases
Active Trade Setups
– Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex