Sterling technical analysis: GBP / USD, GBP / JPY, EUR / GBP
Sterling technical forecast: bullish
- The British pound posted gains against the US dollar and the euro, but was slightly weaker against the Japanese yen.
- Across all three markets, the strength of the pound has been the main recent driver in recent years as one of the clearest trends on the forex side of the equation.
It was another week of strength for the British Pound as the currency gained against both the Euro and the US Dollar as trends continued in both markets. In GBP / JPY, we are looking for a doji on the weekly as a bit of back and forth developed after three really strong weeks which saw up to 500 pips added to the pair’s spot price.
In the main GBP / USD pair, buyers pushed strongly to a new three-year high. However, last February’s swing-high which is around 1.4243 stood in the way.
However, not all of these are bullish indications as a familiar trendline has entered the equation and made its presence known throughout this week. The reverse of the uptrend channel that guided the pair higher from last September to March has once again come to offer resistance. A similar case happened a month ago when this trendline was confluent with the psychological level of 1.4000, and this led to a retracement of 200 pips. But support cauterized around 1.3800 and the bulls have led over the past few weeks, coming very close to another breakout.
To learn more about the drawing trend lines, check DailyFX Education
For next week, the most attractive scenario for the bulls would be a pullback to support around the 1.4000 handle, after which a show of support could reopen the door for uptrend strategies. Alternatively, breakout strategies may open up on impressions of fresh highs, but given the proximity of the 1.4243 high to the psychological level of 1.4250 traders may want a lot for a little room in an effort to ‘Avoid getting caught on a fake escape.
Technical forecasts should be bullish for the coming week in GBP / USD.
GBP / USD Daily Price Chart
Graphic prepared by James stanley; GBPUSD on Tradingview
GBP / JPY grinds under-155, can the bulls handle it?
GBP / JPY showed similar strength to GBP / USD; in either case, a strong pound sterling is linked to a currency showing varying degrees of weakness.
In GBP / JPY, the pair made a strong but unsuccessful attempt to climb above the 155.00 level this week, which allowed a fairly large grind to manifest on shorter time frames. Perhaps the most puzzling aspect for the bulls was the lows that were printed this week after Tuesday’s high of 154.84 was set. This highlights the fact that the uptrend may be a bit long in the tooth, and due to a pullback before the bulls may finally be able to break out of that 155.00 level.
Similar to the above with the GBP / USD pair, the breakout logic might keep the door open for upside games but, as with the GBP / USD pair at the 1.4250 spot, traders may want to add a safety margin above the psychological level in order to avoid being mean. in a false escape.
On the trend side of the pair, the area around 153.50 looks key, and a support hold could allow risk focused on uptrend approaches.
The forecast for the GBP / JPY will be bullish for the coming week.
GBP / JPY Four Hour Price Chart
Graphic prepared by James stanley; GBPJPY on Tradingview
EUR / GBP Grasps for support after a difficult start to the year
The EUR / GBP was not favorable to the euro bulls during the first months of 2021. A combination of euro weakness and pound sterling strength drove the pair to a new annual low on last month, with a rebound after a foray on the .8500 grip.
Since then, price action has moved into a range from mid-April to early May, when the pound’s bulls gained further momentum. But, they were thwarted at a key point on the chart, around the 76.4% Fibonacci retracement of last year’s major move.
To learn more about Fibonacci retracements, check DailyFX Education
This price came into play last week, causing a slight rebound. This week the bulls and bears continued as neither of them were able to take concerted control of the pair. Another Fibonacci level came into play this week, the 14.4% retracement of the major move from December to April, and this helped mark the week’s low on Tuesday and again on Friday.
This gives the appearance of a possible recovery theme, as sellers still haven’t been able to score much after the April pullback. And while the trend is still bearish, or bullish for the GBP given its role as a counter currency in the pair, there may simply be some more attractive areas for GBP bulls in the week ahead.
The technical forecast for EUR / GBP will be set to neutral.
EUR / GBP Daily Price Chart
Graphic prepared by James stanley; EURGBP on Tradingview
— Written by James stanley, Senior strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX