GBP/USD Daily Price Chart
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GBP/USD Price Analysis: British Pound Testing Downtrend Support

DailyFX.com -

The British Pound has been in free-fall for the past few days with price down more than 2% since the start of August trade. While the immediate threat remains weighted to the downside, the decline is now approaching long-term structural support with key UK &US event risk on tap tomorrow. Here are the updated targets and invalidation levels that matter for GBP/USD heading into the releases. Review this week's Strategy Webinar for an in-depth breakdown of this setup and more.

GBP/USD Daily Price Chart

GBP/USD Daily Price Chart

Technical Outlook: In my Weekly Technical Perspective on the British Pound , we noted that the broader short-bias in Sterling was, "vulnerable heading into key confluence support around 1.2877 . From a trading standpoint, the risk is lower but I'll be on the lookout for possible exhaustion / long entries on a stretch into the lower parallel. " Note that a sliding parallel (red) of the dominant pitchfork extending off the May lows has seen this slope range catch every subsequent low in price. It's make-or-break here for Cable.

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GBP/USD 240min Price Chart

GBP/USD 240min Price Chart

Notes: A closer look at GBP/USD price action further highlights this slope range of support- shorts are vulnerable near-term into this region. Initial resistance stand a 1.2980 backed by 1.3027 with bearish invalidation now lowered to 1.3117 . A close below this slope risks accelerated losses with such a scenario targeting 1.2775 backed by 1.2616 and the 78.6% retracement at 1.2469 .

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Bottom line: Its way too early to be considering the long-side, but fresh shorts from these levels are not advisable. Watch the weekly close - from a trading standpoint, Sterling price stabilization above 1.2877 would be a good indication for a near-term exhaustion low. Keep in mind we get the second read on 2Q UK GDP and the US July Consumer Price Index (CPI) tomorrow- good timing for a final washout lower before the turn?

For a complete breakdown of Michael's trading strategy, review his Foundations of Technical Analysis series on B uilding a T rading S trategy

GBP/USD Trader Sentiment

GBP/USD Trader Sentiment
  • A summary of IG Client Sentiment shows traders are net-long GBP/USD - the ratio stands at +2.64 (72.5% of traders are long) - bearish reading
  • T raders have remained net-long since Apr il 20 th ; price has moved 8.5% lower since then
  • Long positions are 3.7% higher than yesterday and 7.0% higher from last week
  • Short positions are 4.5% higher than yesterday and 4.2% lower 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 less net-long than yesterday bu t more net-long from last week and t he combination of current positioning & recent changes gives us a further mixed GBP / USD trading bias from a sentiment standpoint.

See how shifts in GBP/USD retail positioning are impacting trend- Le arn more about sentiment!

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Relevant GBP/USD Economic Data Releases

GBP/USD Economic Calendar

Economic Calendar - l atest e conomic d evelopments and u pcoming event ri sk

Other Setups in Play

- Written by Michael Boutros , Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex or contact him at mboutros@dailyfx.com

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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