(MENAFN- DailyFX) GBP /USD reversal off resistance breaks below monthly opening range lows- risk remains lower Check out our 2018 GBP/USD projections in our Join Michael for Live Weekly Strategy Webinars on The British Pound has fallen more than 3% off the yearly highs with the decline taking out the April opening range lows. While the broader outlook does remain constructive, near-term the risk for a pullback in price has us looking for a possible exhaustion lower down near structural support.
GBP/USD Daily Price Chart Technical Outlook: In my last we noted that Cable was approaching the 2018 highs at 1.4346 with a breach above this threshold needed to keep the broader long-bias in play. Price posted an outside-weekly reversal off this threshold before break below the objective April opening range lows yesterday. The decline also validates a break of the November slope line and leaves the risk lower while below the monthly open at 1.4024.
Note that yesterday's close marked the fifth consecutive daily decline three of the last five instances of such an occurrence saw a slight reprieve (a day or so) before registering a new low. That said, look for initial support along the lower parallel.
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GBP/USD 240min Price Chart Notes: A closer look at price action sees Cable trading within the confines of a near-term extending off the March highs with this week's decline slipping below the monthly range lows / 61.8% retracement at 1.3965. IF this break is legit, topside advances should be capped by the weekly highs / monthly open resistance at 1.4024/31. A break lower from here targets the lower parallel / 100-day moving average at 1.3854/67 with broader bullish invalidation for the multi-year uptrend at the March low-day close at 1.3775.
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Bottom line: The British pound has broken below the monthly opening range but looks like the decline may be losing some steam here near-term. From a trading standpoint, we'll favor fading strength while below median-line of the descending pattern with the decline to ultimately offer more favorable long entries near long-term slope support.
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GBP/USD IG Client Positioning A summary of shows traders are net-long GBPUSD- the ratio stands at +1.33 (57.0% of traders are long) weak bearishreading Long positions are 15.2% higher than yesterday and 83.1% higher from last week Short positions are 0.5% lower than yesterday and 42.6% 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 positioning and recent changes gives us a stronger GBPUSD-bearish contrarian trading bias from a sentiment standpoint. See how shifts in GBP/USD retail positioning are impacting trend-
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Relevant Data Releases Other Setups in Play
- Written by Michael Boutros, Currency Strategist with DailyFX
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