British Pound Short-Term Outlook: GBP/USD Breakout Build

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

• British Pound attempting sixth consecutive daily advance- first time since July high
• GBP/USD rebound off downtrend support now testing trend resistance- inflection risk
• Resistance 1.2297-1.2315, 1.24, 1.2446/59- Support 1.2199 (key), 1.2160s, 1.2084/89

The British Pound recovery is now approaching the first major resistance hurdle at the July downtrend and the battle lines are clear heading into tomorrow's CPI release. These are the updated targets and invalidation levels that matter on the GBP/USD short-term technical.

Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Sterling setup and more. Join live on Monday’s at 8:30am EST.

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, “attempting to break confluent support here and threatens a steeper decline towards the lower parallel. From a trading standpoint, look to reduce short-exposure / lower protective stops on a stretch towards the 1.23-handle- rallies should be limited to 1.2580 IF price is heading lower on this move.” Sterling broke through support later that day with GBP/USD plunging more than 3% into the October open.

An outside-day reversal off channel support last week is now attempting to mark a sixth-consecutive daily advance with the Pound now up more than 2.4% off the lows. The rally is approaching the July downtrend and the focus is on a possible reaction into this key slope.  

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 trading within the confines of a proposed ascending pitchfork extending off the September / October lows and while it’s too early to rely on this slope, the levels remain well defined. Confluent resistance is eyed here 1.2298-1.2315- a region define by the 23.6% retracement of the July decline, the 100% extension of the sell-off, the May lows, and the 61.8% Fibonacci retracement of the yearly range. Note that channel resistance is eyed just higher (red) and the focus is on possible exhaustion / price inflection here with a breach / close above needed to suggest a more significant low was registered last week.

Initial support rests along the median-line (currently ~1.2260s) backed by objective monthly-open at 1.2199- losses should be limited to this threshold IF price is heading for a breakout here. Ultimately, a break below the lower parallel is needed to mark resumption of the broader downtrend back towards the 2023 yearly open / 78.6% retracement at 1.2084/89 with subsequent support objectives eyed at the 88.6% retracement near 1.1955.

A topside breach from here would expose the 1.24-handle and the next major pivot zone at 1.2446/59- a region defined by the 200-day moving average, the December high, and the 38.2% retracement. Look for a larger reaction there IF reached.

Bottom line: The British Pound has rallied off downtrend support with the recovery now approaching trend resistance- looking for a reaction up here. From at trading standpoint, pullbacks should be limited to the October-open IF price is heading higher with a close above the July channel needed to keep the immediate rally viable.

Note that key US inflation data is on tap tomorrow and will likely offer some guidance here- stay nimble into the release. A washout below the monthly range lows could see things fall-apart rather quickly. Review my latest British Pound Weekly Forecast for a closer look at the longer-term GBP/USD trade levels.

Key GBP/USD Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

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

Follow Michael on Twitter @MBForex