GBP Technical Analysis

The price in question is 148.29, and this is the 61.8% retracement of June to December, 2016 major move in the pair. Perhaps most importantly, this price had helped to set resistance for almost ten full months in GBP/JPY. Prices turned-around here in mid-December, and again in May as GBP/JPY put in a peculiar period of price action. This pair is often trending or moving in somewhat of a directional manner: But it’s also notorious for being wild and chaotic. The fact that the first nine months of this year were so seemingly quiet in the pair is something that deserves attention, as we may be on the cusp of some brutal movement, in one direction or the other.

We have yet to see GBP/JPY embark on a directional movement since that initial September breakout. Price action has been bound between support of 146.94 and resistance of 152.86 for more than two-and-a-half months.

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GBP/USD can be directed to a deeper area on the chart. The levels of 1.3117 and 1.3216 could be helpful for such a purpose. At 1.3117, we have the 38.2% retracement of the ‘Brexit move’ in the pair, and at 1.3216, we have the 50% retracement of the August-September 2017 bullish move; and this is the same with which the 38.2% has been operable over the past two weeks.

Support in this zone opens the door for stops below the Q4 swing-low of 1.3026, targeting prior resistance at the 1.3477 Fibonacci level.

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GBP/USD has been on a rollercoaster over the past month, with much of the ride being driven by volatility in the US Dollar. The strength in the first half of the month was largely wiped away in a few trading days last week as the Greenback sunk down to fresh three-year lows. But, after those lows have come into place, more strength has showed up, leading to a zig-zag type of performance for USD thus far in February.

GBP/USD has largely been along for the ride. The pair seemingly shrugged off the hawkish shift from the BoE earlier in the month at the bank’s Super Thursday. And then last week’s inflation print appeared to do little to the bullish side of the pair, with a delayed reaction showing a day later (around the release of US inflation numbers). That bullish shift allowed for a 300-plus pip jump, but since then prices have been retracing-lower. The net of all of the above is a rather messy near-term scenario in GBP/USD. A bearish channel has started to show as prices have continued to retrace last week’s gains.

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GBPUSD: Retail trader data shows 47.5% of traders are net-long with the ratio of traders short to long at 1.11 to 1. In fact, traders have remained net-short since Feb 13 when GBPUSD traded near 1.38838; price has moved 0.6% higher since then. The number of traders net-long is 12.4% lower than yesterday and 1.3% lower from last week, while the number of traders net-short is 9.3% lower than yesterday and 9.4% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed GBPUSD trading bias.

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The British Pound had a rough month of February, against both the US Dollar and the Japanese Yen. While GBP/JPY shed more than 1,000 pips in its down-side run, GBP/USD fell by a more modest but still impressive 500 from the first day of February to the first day of March. This is especially notable considering that the US Dollar wasn’t exactly burning-higher on any charts, as prices remain near those three year-lows despite an expanding range.
That low that was set in GBP/USD earlier in the month has led into a bullish channel with price action now fast re-approaching the 1.4000 psychological level. This included a top-side breakout yesterday of a bearish trend-line that had previously helped to hold the highs since late-January.

That bullish pattern has been tempered a bit over the past 24 hours as price action made a fast-approach towards the 1.4000 psychological level. After coming within pips of a re-test, prices have broken back down until finding a bit of support off of 1.3925; which is very near the 1.3930 resistance that we were following last week.

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The British Pound continues to trade-higher after last week’s breakout above the bearish trend-line that had held the highs since January. This morning saw another bullish breakout above the vaulted 1.4000 psychological level after news of a Brexit Transition plan having been agreed upon, and with two very big drivers on the horizon for this week with tomorrow’s CPI and Thursday’s BoE rate decision, the potential remains for high levels of volatility across GBP-pairs.

It’s only mid-day in the US session on Monday and already this week has seen some interesting volatility around the British Pound. The earlier announcement of an agreement on a Brexit transition plan helped to bring bulls back into the currency, with GBP/USD driving above the psychological level of 1.4000 shortly after the announcement. Thus far, buyers have come-in to show support above that price, indicating potential for bullish continuation. But tomorrow morning brings another noteworthy driver with the release of UK inflation numbers for the month of February; and later in the week we hear from the Bank of England at their first rate decision since the hawkish-shift that transpired at the bank’s Super Thursday last month.

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The bearish move in the British Pound has continued into another week. After displaying a semblance of support around the key level of 1.3500 in the first couple of weeks of May, GBP/USD posed a downside break at the start of last week to continue the move, and with a heavy outlay of UK data on the calendar, the potential for a deeper bearish move was there.

At this point, we've seen a bit of support show-up in a familiar area. The zone that runs from 1.3269-1.3321 is an area that helped to mark resistance in August, October and November of last year; then becoming support in December before the pair launched up to fresh post-Brexit highs.

At this point, the primary complication with longer-term stances around GBP/USD is just how oversold the move has become. RSI has been in oversold territory for the entire month of May, and while this doesn’t preclude further declines, it does make the prospect of such a bit more distant.

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GBP/JPY Bounce to Resistance at Prior 2018 Low

This week started off with an increased slate of worry as financial markets gripped for the possibility of another summer of political volatility out of Europe. This helped to bring considerable strength into the Japanese Yen, helping pairs like EUR/JPY and GBP/JPY fall down to fresh 2018 lows.

In GBP/JPY, the selling was especially noticeable, as both a weak British Pound and a strong Japanese Yen contributed to a rather quick and heavy move. The British Pound has been weak for well-over a month now, with a bearish reversal starting in mid-April that hasn't yet reversed. We looked at short-side continuation last week when GBP/JPY had bounced up to a prior area of support around 147.03. That led into the quick bearish continuation move mentioned above, which soon took out both targets at 146.00 and 145.00; and prices continued to sell-off to as low as 143.20.

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GBPUSD: Retail trader data shows 71.0% of traders are net-long with the ratio of traders long to short at 2.45 to 1. In fact, traders have remained net-long since Apr 20 when GBPUSD traded near 1.42353; price has moved 5.8% lower since then. The number of traders net-long is 1.6% lower than yesterday and 5.1% lower from last week, while the number of traders net-short is 0.4% lower than yesterday and 5.2% lower from last week.



We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPUSD prices may continue to fall. Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed GBPUSD trading bias.

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GBPUSD: Retail trader data shows 72.4% of traders are net-long with the ratio of traders long to short at 2.62 to 1. In fact, traders have remained net-long since Apr 20 when GBPUSD traded near 1.41803; price has moved 7.0% lower since then. The number of traders net-long is 7.0% higher than yesterday and 4.5% higher from last week, while the number of traders net-short is 0.1% lower than yesterday and 14.2% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPUSD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBPUSD-bearish contrarian trading bias.

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