GBP/USD has breached the December uptrend after faltering just before resistance, indicating a significant change in the near-term framework. The pullback extended nearly 1.3% from the highs before rebounding, with the weekly opening range now established just above the 200-day moving average—breakout pending. Resistance levels are identified at 1.3474, 1.3500/02, and 1.3528, while support is found at 1.3391/94, 1.3345/55, and 1.3318. The GBP/USD has declined following a breach of the December uptrend, as the price pulls back from resistance and redirects attention to support close to the weekly opening-range low. The earlier rebound this week has solidified this area as a significant near-term pivot point. The analysis of price behavior in this context will be crucial for determining if the movement signifies a corrective retracement within a larger consolidation phase or if it marks the initial phases of a more sustained downturn. Clear divisions are evident on the short-term technical charts for GBP/USD.
In the previous month’s analysis of the British Pound Short-term Outlook, it was observed that GBP/USD was trading within a range just beneath resistance. It was stated that, “While the broader outlook remains constructive, the immediate advance may be vulnerable while below this pivot zone.” From a trading perspective, losses should be confined to 1.3269 for the November uptrend to stay intact, while a breakthrough above 1.3453 is essential to drive the next significant phase of the advance. Sterling advanced in the subsequent week, with the rally tapering off just before encountering resistance at the beginning of the year at 1.3573/93—an area characterized by the 78.6% retracement of the September decline and the swing highs from May and August. The pullback extended nearly 1.3% from the highs before rebounding at the start of the week, characterized by an outside-day reversal off the 200-day moving average on Monday, which established the weekly opening range. Monitor for a breakout of this candle on a daily closing basis to propel the subsequent movement in GBP/USD.
An analysis of Sterling price movement indicates that GBP/USD is operating within the parameters of a descending pitchfork that originates from the highs observed in December and January. It is important to observe that the break of the December uptrend from last week has been retested as resistance in the last two days, indicating that a more significant correction could be in progress. The yearly open resistance is observed at 1.3474, supported by near-term bearish invalidation at the 61.8% retracement of the monthly range and the monthly high-day close at 1.3500/02. Ultimately, a breach or daily close above the October high at 1.3528 is necessary to restore bullish control, with key resistance remaining firm at 1.3573/93. Initial support is positioned at the weekly opening-range low and the 200-day moving average, specifically at 1.3391/95. Key support levels are identified at the September low-day close and the 38.2% retracement of the November rally, specifically at 1.3345/55, along with the 100% extension of the monthly decline positioned at 1.3318. Both levels signify potential zones for downside exhaustion or price inflection, contingent upon being reached.
Losses exceeding this level would indicate that a more substantial peak has been established and a major trend reversal is in progress towards the November high at 1.3269. A breach of the December channel poses a risk for a more significant pullback, as the weekly range is positioned just above the 200-day moving average. From a trading perspective, rallies are expected to be capped at 1.35 if the price continues to trend downward during this phase, with a breach below 1.3392 required to trigger the subsequent phase of the decline. Event risk remains constrained until the following week, as significant employment and inflation data from the UK, along with the Fed’s favored inflation measure, are forthcoming. Remain agile as these releases approach and monitor the weekly close for direction in this context. An updated British Pound Weekly Forecast will be published once we obtain more clarity on the longer-term GBP/USD technical trade levels.