British Pound Technical Forecast: GBP/USD Reversal Risks May Setback

(MENAFN- DailyFX) Sterling Technical Price Outlook: GBP/USD Weekly Trade Levels

• Sterling technical trade level update Weekly Chart
• GBP/USD weekly reversal off resistance keeps multi-month range in focus heading into May
• Resistance at 1.3931, 1.4024 Key Support 1.3654, broader bullish invalidation1.3435

The British Pound plunged more than 0.5% against the US Dollar last week with Sterling reversing sharply off key technical resistance. The threat of a deeper correction within the broader uptrend remains heading into the May open and the battle lines have been drawn. These are the updated targets and invalidation levels that matter on the GBP/USD weekly technical chart. Review my latest Strategy Webinar for an in-depth breakdown of this Cable trade setup and more.

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

Notes: In my last Sterling Weekly Price Outlook we noted that the GBP/USD , 'rebound may have more upside near-term but the broader risk remains for a deeper correction while below 1.4024. The rally stretched higher in the following days with Cable registering a high at 1.4009 before reversing sharply with prices marking a weekly reversal into the close of April.

The major levels remain unchanged into the May open with initial resistance steady at the yearly high-week close at close at 1.3931 backed by near-term bearish invalidation at 1.3997-1.4024- a region defined by the 2018 high-week close and the 61.8% Fibonacci retracement of the February decline. A breach / close above this threshold is needed to mark resumption toward the yearly high / 2018 high-close / 50% retracement at 1.4236-1.43. Weekly support is eyed at the 61.8% extension / Brexit gap at 1.3654/75 backed by more a more significant technical confluence at the 100% extension / 2017 high-week close at 1.3435/94- both areas of interest for possible downside exhaustion IF reached.

Bottom Line: The Sterling rally failed at key resistance this week keeps the focus on this multi-month range heading into the May open. From at standpoint, the threat remains for a deeper correction within the confines of the 2020 uptrend while below the 1.40-handle. Be on the lookout for possible downside exhaustion heading into the May open with a move lower likely to offer more favorable opportunities closer to broader uptrend support. I'll publish an updated Sterling Price Outlook once we get further clarity on the near-term GBP/USD technical trade levels.

• A summary of IG Client Sentiment shows traders are net-long GBP/USD - the ratio stands at +1.22 (54.89% of traders are long) neutral reading
• Long positions are15.11% higher than yesterday and 2.52% lower from last week
• Short positions are6.62% lower than yesterday and 5.44% 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. Traders are more net-long than yesterday but less 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.

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--- Written by Michael Boutros , Technical Currency Strategist with DailyFX

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