British Pound short-term outlook: GBP/USD breakout faces BoE

British Pound technical outlook: GBP/USD short-term trade levels

• British Pound breaches yearly opening-range- rally extends 7.33% off yearly low
• GBP/USD within striking distance of uptrend resistance into Super Thursday, BoE
• Sterling resistance 1.2667, 1.2757 (key), 1.30- support 1.2566, 1.2447, 1.2275 (critical)

The British Pound surged to fresh yearly highs this week with GBP/USD building on a breakout of the yearly opening-range. The advance is approaching uptrend resistance and while the broader outlook is constructive, the immediate advance may be vulnerable heading into the Bank of England interest rate decision this week. These are the updated targets and invalidation levels that matter on the GBP/USD short-term technical charts ahead of Super Thursday.

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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 the focus was, “on a breakout of the monthly opening-range. From at trading standpoint, the near-term threat is lower while below 1.2447 – look for a reaction on a stretch into the lower parallels for guidance IF reached.” Multiple stretches towards the 25% parallel failed with price contracting into a monthly opening-range for weeks before breaking higher into the close of April.

The rally is now testing initial resistance around the May highs at 1.2667 with a more significant confluence zone just higher at the 61.8% Fibonacci retracement of the 2021 decline at 1.2757- a breach / daily close above this threshold would be needed fuel the next leg higher towards 1.30 and the 61.8% extension of the September advance at 1.3103.

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 carving the weekly opening-range just below resistance at 1.2667. Monthly-open support rests at 1.2566 backed by the median-line (currently near ~1.2470s) and the December high at 1.2447- a break / close below this threshold would threaten a larger correction within the uptrend toward the April lows at 1.2275. Broader bullish invalidation now raised to the April lows at 1.2275.

Bottom line: The Sterling breakout maybe vulnerable to exhaustion on the back of a 7.3% rally off the yearly lows. From a trading standpoint, a good zone to reduce portions of long-exposure / raise protective stops – losses should be limited to the May opening-range lows IF price is heading higher on this stretch. Look for a larger reaction on a test of Fibonacci resistance just higher for guidance. Tread lightly heading into Super Thursday with the BoE rate decision likely to fuel some volatility here- stay nimble. Review my latest British Pound Weekly Forecast for a closer look at the longer-term GBP/USD trade levels.

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