British Pound Price Action Setups: GBP/USD, GBP/JPY, EUR/GBP

In early April I looked at the British Pound as compared to the Euro, saying that I though Cable looked like a cleaner backdrop for USD-weakness than what had shown in EUR/USD. At the base of that thesis was the EUR/GBP cross pair, which had just made a trip up to a resistance area linked to a Fibonacci retracement level. Since then, GBP strength has taken over and especially over the past few days, with another run of USD weakness hitting, GBP/USD has taken on a brighter tone than the EUR/USD major pair.

In GBP/USD, a falling wedge formation built last week as sellers were slow at support but aggressive on bounces at lower-high resistance. That wedge broke out decisively on Friday, with the run continuing through early trade this week. Price has pushed up toa  familiar resistance level of 1.3568, and that’s since produced a pullback with a couple of elongated upper wicks, illustrating sellers’ response to bulls attempt at running up to the 1.3600 level that remains an elusive spot for the pair.

GBP/USD Four-Hour Chart

Chart prepared by James Stanley; data derived from Tradingview

From the above chart, we can see that the 1.3484-1.3500 zone remains of interest as this could set up higher-low support on subsequent pullback setups, with buyers showing up to defend last week’s lower-low.

But, for GBP strength there may be another area of note against the Japanese Yen as we approach a Bank of Japan rate decision.

GBP/JPY

I looked into GBP/JPY a couple of times last week as the pair had pushed back above the 215.00 level, and that line-in-the-sand held as support for three consecutive days to finish last week, with buyers making a push up to a fresh 17-year high in early trade for this week.

GBP/JPY Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

GBP/JPY Shorter-Term

From the four-hour we can get better view of that support hold at 215 as there were multiple underside wicks that grasped on to that price, with buyers ultimately prevailing as follow-through hit after the weekly open. So far, however, bulls haven’t been able to sustain the move above the 215.83 level that was also looked at last week and this has reference back to 2008, and given the gravity of headline events in the next few days, if we do see a pullback here there’s now the possibility of higher-low support at the 215.38 level. If that doesn’t hold, 215 is back on the radar and if that gets slipped through, especially if it’s after the BoJ but before the BoE, caution should be utilized as something may be shifting around JPY themes.

GBP/JPY Four-Hour Chart

Chart prepared by James Stanley; data derived from Tradingview

EUR/GBP

In the cross pair it was the resistance zone from 0.8739-0.8753 that came into play in early-April and ultimately helped to tip the flow from EUR/USD to GBP/USD.

As looked at closely coming into the month, EUR/USD had retained more viable bullish structure than GBP/USD, but given the resistance in the cross pair the prospect of that shifting was gaining in attraction. That ultimately took place shortly after and at this point, we can see where prices have continued to tip down and there’s now a big spot of possible support a little lower, around 0.8628 that’s getting close by.

If that comes into play, then there may be an attractive point to anticipate a shift, where EUR/USD and EUR/JPY could take preference for strength over GBP/USD and GBP/JPY. We’re not quite there at this point, but if the ECB sounds more-hawkish than expected on Thursday that could definitely begin to show.

Until then, the range remains in play.

EUR/GBP Daily Price Chart

Chart prepared by James Stanley; data derived from Tradingview

--- written by James Stanley, Senior Market Analyst, Global Macro