British Pound Technical Analysis: GBP/USD, GBP/JPY, EUR/GBP

The British Pound set a fresh yearly high against the Japanese Yen last week, and against the US Dollar, it may be one of the more attractive major pairs in the event of DXY weakness given the current backdrop. The currency gained against the Euro last week although EUR/GBP still remains somewhat far away from a key support zone, as looked at below.

With Japanese Yen weakness remaining as the dominant factor in FX markets GBP/JPY has pushed up to a fresh yearly high, with a 17-year high not too far away.

But for this week, it’s GBP/USD that’s of interest, as the US Dollar grinds up against a massive resistance zone that, so far, hasn’t shown willingness to give way. I looked at this on Friday and showed a cup and handle formation in the Greenback, which does keep the door open for breakout setups. But, with USD/JPY and USD/CAD both showing healthy bullish construction, the recent stall in GBP/USD above the 1.3000 level stands out, and if we do see that resistance hold in the US Dollar, a case can be made for reversal setups in the major pair of GBP/USD.

It was earlier in November when GBP/USD was falling fast, making a quick run at the 1.3000 psychological level. But, as I showed in the webinar at the time RSI on the daily chart had gotten massively oversold, to levels that hadn’t been seen in more than two years. That was also around the first re-test of the 100-100.22 zone in DXY, and both DXY and Cable snapped back quickly as sellers stalled just above the 1.3000 level in GBP/USD.

That rally in GBP/USD was short-lived, however, as resistance played in at a trendline projection, but it’s what’s happened after that which is of interest, as sellers have once again failed to push down to the 1.3000 level and now, from last week’s swing, we have a higher-low to work with.

GBP/USD Four-Hour Chart

Chart prepared by James Stanley; data derived from Tradingview

GBP/USD Short-Term Resistance

It’s not quite home free for bulls yet as price remains in a major zone of short-term resistance that’s already been in-play as support a couple of different times over the past month. The key here is the deduction where GBP/USD isn’t quite as visible with recent USD-strength, so in the event that we do get a weak Dollar in the near future, that resistance in Cable can become malleable.

But this resistance zone spans from 1.3100-1.3117, and above that, another level of importance rests at 1.3140. If we get a break of that price, then we’ll also have a break of the longer-term bearish trendline, and that opens the door for a move up to 1.3186 and then 1.3250, which has a bit of historical reference for the pair.

With that said, there may be greener pastures at the moment if looking to focus on GBP-strength which I’ll look at below.

GBP/USD Two-Hour Chart

Chart prepared by James Stanley; data derived from Tradingview

GBP/JPY

I’ve been harping on the Yen for weakness for months now and GBP/JPY has been one of the greener pastures for that theme, and this was capped by last week’s rally up to a fresh yearly high.

GBP/JPY may not be done as there’s still bullish structure in play to go along with a bullish breakout formation. But, it seems the situation would need some USD-weakness to play out which we have to hold out as a possibility. Because if we do see continued strength in the Dollar and, in-turn, USD/JPY, then its reasonable to expect intervention threats to become more of a challenge for near-term price action in JPY-pairs. If the USD can relax a bit, however, the ire from the Japanese Finance Ministry should be limited and in that case cross-currents from GBP and the Euro can allow for bullish continuation in GBP/JPY and EUR/JPY.

Nonetheless, the techs show us the what more than the why and that’s what’s important in my view, and at this point, we’ve begun to tip-toe up to resistance at 17.year-highs in the zone that turned bulls around last year (with a sell-off driven by intervention).

GBP/JPY Weekly Chart

Chart prepared by James Stanley; data derived from Tradingview

GBP/JPY Levels

Since the last re-test at 200 bulls have firmly been in-control of the pair and the move has been rather one-sided, especially with a shorter-term vantage point.

There are support levels at confluent spots a little lower, however, taken from the 38.2% and 50% marks of the recent rally, plotted at 203.89 and 202.97, respectively.

GBP/JPY Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

EUR/GBP

EUR/GBP isn’t what I normally consider as a ‘big mover.’ But, like I looked at in the USD strategy article for this week, EUR/USD could also have an attraction for USD-weakness scenarios, so at that point, it becomes a competition between the Euro and British Pound for which can show more strength.

For last week, that was GBP, but in the EUR/GBP cross pair there’s a big spot of support that can set up attractively for bullish continuation scenarios, plotted from .8739-.8753. This was resistance a few different times while lining up an ascending triangle, and hasn’t yet been tested for support.

This can have a few different connotations, including USD-strategy. If we see that zone come into play and the pair bounce, that’s where EUR/USD can become more attractive for USD-weakness scenarios. Or, perhaps, if looking to work with the cross pair, that bullish continuation setup would open the door for higher-low support at prior resistance, looking for topside continuation into fresh multi-year highs.

EUR/GBP Weekly Chart

Chart prepared by James Stanley; data derived from Tradingview

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