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

• Sterling technical trade level update – Weekly Chart
• GBP/USD recovery rips into first major test of resistance- risk for exhaustion / price inflection
• Weekly resistance 1.1414/80 (key), 1.1650, 1.1843-1.1950 – Support 1.1160, 1.1060, 1.0790-1.0840

The British Pound surged more than 3% against the US Dollar into the October open with GBP/USD attempting to snap a six-day winning streak today. A massive rally off fresh record lows has responded to the first major pivot zone and we’re looking for a reaction in the days ahead of guidance on whether a larger Sterling rebound is underway. These are the updated targets and invalidation levels that matter on the GBP/USD weekly chart heading into October. Review my latest Strategy Webinar for an in-depth breakdown of this Sterling technical setup and more.

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British Pound Price Chart – GBP/USD Weekly

Chart Prepared by Michael Boutros, Technical Strategist; GBP/USD on Tradingview

Notes: In last month’s British Pound Weekly Technical Forecast we noted that the GBP/USD collapse had, “responded to downtrend support on a massive multi-week stretch to fresh record lows. The threat for a larger recovery remains on the back of this sell-off and the focus is for possible topside exhaustion into the October open.” Sterling ripped more than 11% off the lows on a six-day rally with the advance now approaching a critical pivot zone and the origin of the September breakdown at 1.1414/80– a region defined by the 2020 low and the 1984 low. Looking for possible price inflection off this threshold.

Initial support now rests at the record low-week close at 1.1160 backed by 1.1060. Ultimately a break / weekly-close below the 61.8% Fibonacci retracement / low-close at 1.0790-1.0840 is needed to mark resumption of the broader downtrend. Note that such a scenario would likely fuel another accelerated sell-off towards the 1985 lows again at 1.0520 and beyond. A breach higher from here would challenge a test of yearly downtrend resistance around the 2020 close lows at ~1.1650. Broader bearish invalidation now lowered to the 38.2% retracement of the 2021 decline / 2016 post-Brexit low at 1.1843-1.1950.

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

Bottom Line: The British Pound recovery is now approaching the first major test at a key pivot zone- looking for possible price inflection / exhaustion off this mark. From a trading standpoint, risk for some pullback here – losses would need to be limited to 1.0790 to suggest a more significant low was registered last month. Ultimately, we’re looking for a breakout of the 1.1060-1.1480 range for guidance here- stay nimble and respect the weekly close with regards to the median-line. I’ll publish an updated Sterling short-term trade outlook once we get further clarity on the near-term GBP/USD technical trade levels.

British Pound Trader Sentiment – GBP/USD Price Chart

• A summary of IG Client Sentiment shows traders are net-long GBP/USD – the ratio stands at +1.02 (50.42% of traders are long) – typically neutral reading
• Long positions are 9.64% lower than yesterday and 33.00% lower from last week
• Short positions are 9.29% higher than yesterday and 51.61% 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. Yet traders are less net-long than yesterday and compared with last week. From a sentiment standpoint, the recent changes in positioning warn that the current GBP/USD price trend may soon reverse higher despite the fact traders remain net-long.

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— Written by Michael Boutros, Technical Strategist with DailyFX

Follow Michael on Twitter @MBForex