British Pound Short-term Outlook: GBP/USD Bulls Emerge

British Pound Technical Outlook: GBP/USD Short-Term Trade Levels

• British Pound marks false break at downtrend support- threatens larger correction
• GBP/USD approaching initial trend resistance- weekly opening-range breakout imminent
• Resistance 1.2731/73, 1.2820s, 1.2849/80 (key)- Support 1.2571-1.2613 (key), 1.2487, 1.2423

The British Pound rallied more than 2.1% off the November low with GBP/USD now approaching initial resistance into the September downtrend. The weekly opening-range is set heading into tomorrow’s US non-farm payroll report and the focus is on a potential breakout in the days ahead. Battle lines drawn on the GBP/USD short-term technical charts.

British Pound Price Chart – GBP/USD Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; GBP/USD on TradingView

Technical Outlook: In last month’s British Pound Short-term Outlook, we noted that GBP/USD was, “approaching a major support pivot and while a break of the monthly opening-range keeps the focus lower, the immediate decline may be vulnerable into this zone. From at trading standpoint, look to reduce short-exposure / lower protective stops on a stretch towards the 1.26-handle.” Sterling briefly broke below support to register an intraday low at 1.2487 before rebounding more than 2.1% into the close of the month.

The advance has been testing resistance for the past two weeks at 1.2731/73- a region defined by the objective yearly open, the 61.8% retracement of the yearly range, and the February 2019 swing low. Note that the median-line converges on this threshold over the next few days and a breach / close above is needed to threaten a larger correction. Looking for possible price infection here.

British Pound Price Chart – GBP/USD 240min

Chart Prepared by Michael Boutros, Sr. Technical Strategist; GBP/USD on TradingView

Notes: A closer look at Sterling price action shows GBP/USD testing resistance ahead of the US open at the weekly open / weekly opening-range highs. A topside breach here would expose the 200-day moving average (currently ~1.2820) and a more significant technical confluence at 1.2849/80- a region defined by the 38.2% retracement of the September decline, the March high-day close (HDC), and the 100% extension of the recent advance. Look for a lager reaction there IF reached with breach / close above needed to suggest a more significant low was registered last month / a larger trend reversal is underway.

Key support remains unchanged at the 61.8% retracement of the 2023 October rally /June & July lows at 1.2571-1.2613- a break below this threshold would be needed to mark downtrend resumption towards subsequent support objectives at 1.2487 and the 2022 December HDC at 1.2423 (an area of interest for possible downside exhaustion / price inflection IF reached).

Bottom line: A false break of downtrend resistance is threatening a larger recovery in GBP/USD. For now, the immediate focus is on a breakout of the weekly opening-range for guidance with the broader September downtrend vulnerable while above 1.2571. From a trading standpoint, rallies would need to be limited to 1.2880 for the multi-month downtrend to remain viable.

Keep in mind US non-farm payrolls are on tap tomorrow with the monthly opening-range now taking shape just above support. Stay nimble into the release a watch the weekly closes here for guidance. Review my latest British Pound Weekly Forecast for a closer look at the longer-term GBP/USD technical trade levels.

Key GBP/USD Economic Data Releases

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--- Written by Michael Boutros, Sr Technical Strategist with FOREX.com

Follow Michael on X @MBForex