GBP Technical Forecast Talking Points:
The British Pound continued to pullback this week against the US Dollar. The big item on the economic calendar out of the UK was the final ‘Super Thursday’ rate decision at the Bank of England for Mr. Mark Carney, in which the BoE offered an updated inflation forecast to go along with the rate decision and press conference. Perhaps a bit surprising was the fact that two members voted for a rate cut at that meeting, and when combined with what’s become a really strong US Dollar a deeper pullback showed in GBP/USD. The bull pennant formation that was being tested on Tuesday saw a downside break and sellers continued to push into the weekly close, making a fast run at the 1.2750 psychological level.
Given the fact that price action remains above the 38.2% retracement of the October breakout, this isn’t quite a bearish scenario yet although the bullish theme remains on pause as a deeper pullback may develop. The 38.2% retracement of that prior major move shows in a key area on the chart around 1.2700, of which multiple Fibonacci levels exist within close proximity. This confluent zone can be followed for support potential and a show of buyers upon re-tests can re-open the door to bullish strategies. Until then, the technical forecast will remain at neutral.
Technical Forecast for GBP/USD: Neutral
GBP/USD Four-Hour Price Chart
GBP/JPY Tests Range Support
Perhaps more attractive for topside British Pound plays is GBP/JPY. The pair put in a similar bullish breakout in the month of October and while GBP/USD resisted at 1.3000, GBP/JPY put in a move above the 140.00 level. Buyers were unable to hold the bid, however, as price action fell back to range support around the 139.00 level, and that range has held through this week’s trade. This helps to keep the door open for bullish scenarios in the pair.
Technical Forecast for GBP/JPY: Bullish
GBP/JPY Daily Price Chart
Against the Euro the British Pound posed a minor gain throughout this week’s trade. Noteworthy, however is the fact that price action remains at a key spot of support on the longer-term EUR/GBP chart. This shows around .8578, which is the 88.6% retracement of the March-August bullish move, and this support level came into play a couple of different times in October and has yet to give way. The 88.6% retracement will often be approached for reversal potential and given the continued support that’s been seen above that price since it came into play last month, traders looking for deeper reversal potential in the British Pound can focus on topside plays in EUR/GBP.
Technical Forecast for EUR/GBP: Bullish
EUR/GBP Weekly Price Chart
To read more:
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— Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX