GBP/USD : Failed Rally
(Sun, 10 Jan 2021). The British Pound snapped a three-week advance against the US Dollar with GBP/USD reversing off confluence technical resistance to close lower by 0.86% on Friday. The reversal threatens a larger Cable correction within the confines of the broader May advance and we’re looking for possible infection off this key pivot zone heading deeper into January trade. These are the updated targets and invalidation levels that matter on the GBP/USD weekly technical chart.
STERLING PRICE CHART - GBP/USD WEEKLY
Notes:In my last Sterling Weekly Price Outlook we noted that, “be on the lookout for a reaction on a move lower towards uptrend support for guidance – ultimately, losses should be limited to the 1.30-handle IF Cable is indeed heading higher on this stretch.” Cable registered a low at 1.3188 in the days that followed before surging higher with the rally halting at confluence resistance into the start of the year at 1.3621/75- a region defined by the 38.2% Fibonacci retracement of the 2014 decline / the 2016 Brexit gap and converges on basic trendline resistance extending off the march 2020 high. A breach / weekly close above this threshold is needed to keep the advance viable heading deeper into January.
Initial weekly support rests at the 2017 high-week reversal close at 1.3494 backed the 61.8% retracement / 2020 yearly open at 1.3245/50 and 1.3164- both zones of interest for possible downside exhaustion IF reached. Ultimately, a topside breach / weekly close above 1.3675 is needed to validate a larger Sterling breakout with such a scenario exposing subsequent resistance objectives at the 2018 high-week close at 1.3997 and the 50% retracement / 20178 high at 1.4303/77.
Bottom Line:The Sterling rally has stalled at confluence trend resistance into the start of the year. From a trading standpoint, the threat for a larger correction remains while below 1.3675 – ultimately a larger pullback may offer more favorable opportunities closer to uptrend support. Its important to note the technical significance of this resistance threshold – expect substantial acceleration in the event of a topside breach here.
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