British Pound Forecast: GBP/USD Recovery to Face Fed, BoE, NFP

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

• Sterling updated technical trade levels – Weekly Chart
• GBP/USD reversal off yearly trend resistance in focus- FOMC, BoE, NFPs on tap
• Weekly resistance 1.1650, 1.1843-1.1950, 1.2156– Support 1.1414, 1.1160, 1.0840/48

The British Pound is off more than 1% against the US Dollar this week with GBP/USD reversing off yearly downtrend resistance. I’m looking for support on this pullback with the immediate focus on a breakout of the 1.1414-1.1650 range for guidance. The next three-days represent significant event risk for Sterling with the Fed, BoE and NFPs on tap. These are the updated targets and invalidation levels that matter on the GBP/USD technical charts 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 Daily

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

Notes: In my last British Pound Weekly Technical Forecast I noted that the, “threat of a larger recovery within the broader yearly downtrend remains and the focus is on a breakout of the monthly range for guidance.” A breach above the October opening-range / resistance around the 2020 / 1984 lows at 1.1414/80 late in the month fueled a rally of more than 1.5% with GBP/USD testing key resistance last week at 1.1650– a level defined by the 2020 close low and converges on yearly channel resistance. I’m looking for a reaction / price inflection here.

A breach / weekly close above this threshold would denote a breakout of the yearly downtrend and suggest a more significant low was registered last month / larger reversal is underway. Subsequent resistance objectives eyed at the 38.2% Fibonacci retracement of the 2021 decline at 1.1843 backed closely by the 2016 post-Brexit low at 1.1950 and the May swing low at 1.2156.

A pivot back below 1.1414/80 would threaten a larger pullback towards the yearly low-week close at 1.1160– ultimately, a break / weekly close below the yearly low-close / 61.8% retracement of the September advance at 1.0840/48 would be needed to mark resumption of the broader downtrend with such a scenario exposing subsequent support objectives at the 1985 lows (1.0520) and a possible test of parity.

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

Bottom Line: Looking for support on this pullback off yearly downtrend support. From at trading standpoint, losses should be limited by 1.1160 IF price is heading higher on this stretch with a close above 1.1650 needed to clear the way. Keep in mind the FOMC interest rate decision is on tap later today with the Bank of England (BoE) and US non-farm payrolls (NFP) looming into the close of the week. It’s a three day flurry of major economic releases- expect volatility and tread lightly into the close. Review my latest Sterling short-term trade outlook for a closer look at 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 +1.21 (54.83% of traders are long) – typically weak bearish reading
• Long positions are 1.87% lower than yesterday and 5.77% higher from last week
• Short positions are 1.85% higher than yesterday and 8.10% 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 less net-long than yesterday but more net-long from last week. The combination of current positioning and recent changes gives us a further mixed GBP/USD trading bias from a sentiment standpoint.

UK / US Economic Calendar

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— Written by Michael Boutros, Technical Strategist with DailyFX

Follow Michael on Twitter @MBForex