British Pound Technical Forecast: GBP/USD Recovery

British Pound Technical Price Outlook: GBP/USD Weekly Trading Levels

• Sterling technical trading level update – Weekly Chart
• GBP/USD a rebound from downtrend support threatens a test of downtrend resistance
• Weekly resistance, 1.2166, 1.2348, 1.2520– Support 1.1861 (key), 1.1650, 1.1414

The British Pound is trying to mount a second weekly advance against the American dollar after a sharp rebound from tech support earlier in the month. While the potential for further near-term gains remains, the recovery is keeping price within the annual low and the focus is on a possible stretch to resistance levels only higher for guidance. These are the updated targets and invalidation levels that matter on the GBP/American dollar weekly chart going into July’s Fed rate decision / close. Review my last Strategy Webinar for a deep break from this Sterling technical arrangement and more.

British Pound Price Chart – GBP/USD Weekly

Chart Prepared by Michael BoutrosTechnical Strategist; GBP/USD on Tradingview

Notes: In my last British PoundEvery week Technical Forecast we noticed that the GBP / USD approached a key, “supporting pivot at the beginning of the month and the focus is on a possible price bending of this mark. From a trading point of view, a good zone to reduce parts of short exposure / lower protective stops – rallies should be capped by monthly opening resistance at -1.2173 IF the price actually turns lower during this break.” Sterling continued to record lows at 1.1760 on July 14th (in the midst of building a weekly divergence) before rebounding from bearish support (red channel) with GBP/USD picking up almost 2.8% of the lows. The focus is on this bear market recovery with the FOMC interest rate decision on tap heading into the end of the month.

At first every week resistance viewed at the low week of May 2020 at 1.2166 supported by the 23.6% Fibonacci rebuke of the 2021 decline / late May weekly reversal close at 1.2348. Wider bearish invalidation has now dropped to the highlighted region around the 38.2% retracement at 1.2520. Break / close below the low week close at 1.1861 needed to mark a resumption of the broader downtrend with such a scenario exhibiting subsequent support targets at the 2020 close low (1.1650) and the 2020 lows at 1.1414.

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Bottom line: The British Pound has bounced back from bearish support and leaves room for further near-term gains in the broader decline – rallies should be limited to yearly channel resistance IF the price still goes lower in this stretch. From a trading point of view, watch out for a potential top run-out before 1.2348 with a weekly close below 1.1861 needed to clear the way for the next leg lower in price. Remember that the FOMC interest rate decision is due this week, followed by US GDP and inflation (PCE) data with the end of the month upon us- expect some volatility, tread lightly and stay alert.

British Pound Trader Sentiment – GBP/USD Price Chart

• Summary of IG Customer Sentiment shows that traders are net long GBP/USD – the ratio stands at +2.25 (69.27% ​​of traders are long) – usually bearish reading
• Long positions are 1.29% higher than yesterday and 1.16% lower than last week
• Short positions are 33.54% higher than yesterday and 19.45% higher than last week
• We usually take a contrary view to crowd sentiment, and the fact that traders are net long suggests that GBP/USD prices will continue to fall. However, traders are less net long than yesterday and compared to last week. From a feeling point of view, the recent changes in positioning warn that the current price trend of GBP / USD may soon reverse higher despite the fact that traders remain net-long.

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— Written by Michael BoutrosTechnical Strategist with DailyFX

follow Michael on Twitter @MBForex