British Pound Short-Term Outlook: GBP/USD Breakout Faces First Test

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

• British Pound breakout of multi-month downtrend up more than 3.1% off October low
• GBP/USD rally exhausts at uptrend resistance- risk remains for near-term correction
• Resistance 1.2337, 1.2382-1.24, 1.2446/59 (key) - Support 1.2279, 1.2186, 1.2153 (key)

The British Pound has rallied more than 2.2% month-to-date with GBP/USD breaking out of a multi-month downtrend last week. The advance faltered just ahead of technical resistance into the weekly-open and while the threat for further losses remains, we’re on the lookout for possible downside exhaustion in the days ahead. These are the updated targets and invalidation levels that matter on the GBP/USD short-term technical charts.

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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 a six-day rally off key support was “approaching the July downtrend and the focus is on a possible reaction into this key slope.” GBP/USD reversed sharply lower the following day with the plunge settling back above key support into the close of October.

A breakout of the July downtrend into the November-open surged more than 3.1% off the October lows with the rally exhausting just pips ahead of confluent resistance at 1.2435/59- a region defined by the 200-day moving average, the December / January highs, and the 38.2% retracement of the July decline. We’re on the lookout for possible support on this pullback with the broader outlook constructive while above the objective monthly open at 1.2153.

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 late-October swing lows. Price is testing support today at the confluence of the median-line and the 38.2% retracement of the recent advance at 1.2279- looking for possible inflection here.

A break / close below this threshold would expose a larger correction towards the 61.8% Fibonacci retracement at 1.2186 and the lower parallel / November low at 1.2153 (both areas of interest for possible downside exhaustion / price inflection IF reached.

Initial resistance is eyed with the October swing highs at 1.2337 backed by the weekly open / big figure at 1.2382-1.24. Ultimately, a breach / close above 1.2446/59 is needed to fuel the next leg higher in price towards initial resistance objectives at the August low (1.2548).

Bottom line: A breakout of a multi-month downtrend in the British Pound has pulled back from near-term, uptrend resistance. From at trading standpoint, losses should be limited to the October open IF price is heading higher with a breach / close above 1.2459 needed to fuel the next major leg in price. 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