- August 1, 2018
- Posted by: Trading
- Category: News
In this series we scale-back and take a look at the broader technical picture to gain a bit more perspective on where we are in trend. The British Pound has continued to trade within a well-defined descending formation with the Bank of England (BoE) interest rate decision and quarterly inflation report on tap tomorrow morning. Here are the key targets & invalidation levels that matter on the GBP/USD weekly chart.
New to Forex Trading? Get started with this Free Beginners Guide
GBP/USD Weekly Price Chart
Notes: We’ve been tracking this descending pitchfork in the British Pound for months now with price continuing to respect the lower boundaries of the formation since late-May. Strong daily divergence into these lows has had us looking for the exhaustion rebound- but they’ve all been short lived. Initial weekly support remains at 1.3027 backed by a more significant confluence zone at 1.2877-1.29– a region defined by the key 61.8% retracement of the 2016 advance and the lower median-line parallel. A break / weekly close below this region risks substantial Sterling losses with such a scenario targeting the 2014 trendline, currently around ~1.26.
That said, look for initial weekly resistance along the 38.2% line of the slope with a breach / close above 1.33 needed to suggest a more significant low is in place – such a scenario targets the 2017 high-week close / 52-week moving average which converge on the upper 38.2% line at ~1.3480/94.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
Bottom line: Sterling rebounded off down-trend support last month and leaves the broader short-bias vulnerable heading into key confluence support around 1.2877. From a trading standpoint, the risk is lower but I’ll be on the lookout for possible exhaustion / long entries on a stretch into the lower parallel OR a breach & retest of slope resistance as support.
Keep in mind the Bank of England is expected to hike interest rates by 25 basis points tomorrow (already priced in) with US Non-Farm Payrolls (NFP) slated for Friday. I’ll publish an updated GBP/USD scalp report once we get further clarity on near-term price action.
Even the most seasoned traders need a reminder every now and then-Avoid these Mistakes in your trading
GBP/USD Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-long GBP/USD- the ratio stands at +1.95 (66.2% of traders are long) – bearishreading
- Traders have remained net-long since April 20th; price has moved 6.9% lower since then
- Long positions are1.4% higher than yesterday and 4.7% lower from last week
- Short positions are 1.0% lower than yesterday and 8.6% 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. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger GBP/USD-bearish contrarian trading bias from a sentiment standpoint.
See how shifts in GBP/USD retail positioning are impacting trend- Learn more about sentiment!
Relevant GBP/USD Data Releases
Economic Calendar– for the latest economic developments and upcoming event risk
Previous Weekly Technical Perspectives
— Written by Michael Boutros, Technical Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex or contact him at firstname.lastname@example.org