GBP/USD, GBP/JPY, EUR/GBP, GBP/CAD Price Analysis
- It was generally a strong week for the British Pound with the currency gaining against all of the US Dollar, Japanese Yen, Euro and Canadian Dollar.
- GBP/CAD exploded this week and GBP/USD put in some significant vertical movement, as well; while both EUR/GBP and GBP/JPY bring more questions in regards to continuation of GBP-strength.
- The Bank of England hosts a rate decision on Thursday and this, along with the accompanying inflation reports, are likely the biggest drivers on next week’s economic calendar for the GBP.
British Pound Breaks Out, GBP/USD Above the 1.3000 Psychological Level
It was another big week for the British Pound, particularly against the US Dollar as GBP/USD jumped back above the 1.3000 handle for the first time since the March sell-off. Traditionally, that psychological level has shown a tendency to put a pause into the move, at the very least; but nothing like that showed up this week as a combo of British Pound strength with aggressive US Dollar weakness catapulted the pair by more than 300 pips.
Bulls remained large-and-in-charge into Friday trade, at which point buyers pulled back as the March swing-high came into view, helping to produce what’s so far been a mild pullback in the move. But, assuming this candle finishes the day in positive territory, we’d be looking at 11 straight days of GBP/USD gains, capped off by an inverted hammer formation (non-completed).
The forecast for GBP/USD will be set to bullish for the week ahead; and a pullback to the 1.3000 level may open the door for such.
GBP/USD Technical Forecast: Bullish
GBP/USD Daily Price Chart
GBP/JPY Nears the Danger Zone
It was a similarly strong week in GBP/JPY as the pair gained more than 300 pips while breaking out to fresh monthly highs. Of course, for anyone observing USD/JPY it was fairly clear how weak the US Dollar has been; but this shows clear evidence of the British Pound being stronger than both the USD and JPY, and as the door opens into next week the question is just how bullish might buyers remain to be?
We’re currently seeing resistance around the 61.8% Fibonacci retracement of the December 2019 – March 2020 major move. This is the same level that helped to turn around the advance in June, and even if this area can be taken-out, another potentially larger resistance zone sits ahead.
The span around the 140 psychological level also includes a couple of longer-term Fibonacci levels; and the confluence of all of these possible reasons for bears to come into the matter could become a challenge for bulls should the advance continue.
While the trend is attractive and the prospect for continuation remains, to some degree, the plot of resistance ahead raises the bar for bulls and, thusly the forecast will be set to neutral for the week ahead.
GBP/JPY Technical Forecast: Neutral
GBP/JPY Daily Price Chart
EUR/GBP Back to the .9000 Big Fig
It’s been a bit slower in EUR/GBP of recent and the pair has spent more than two months now fighting around the .9000 level. This week marked yet another return of price action to the big figure, following the touch-and-go inflection off of that same price last week.
At this point, it can be difficult to project any near-term trends here given how well-established this range has become; so for next week the forecast will be set to neutral due to that lack of range. However, for traders looking for some mean reversion to work with, EUR/GBP may be of interest.
EUR/GBP Technical Forecast: Neutral
EUR/GBP Daily Price Chart
GBP/CAD Explodes – More to Come?
It was an explosive week in GBP/CAD as the pair had, at one point, gained more than 500 pips. I had written an article on the Canadian Dollar on Thursday, noting how the lack of continued sell-off in USD/CAD, even as the US Dollar was pushing to fresh two-year-lows, was indicative of CAD-weakness helping to offset some of that USD-weakness. And, sure enough, if that CAD weakness is applied to the strength in the British Pound, GBP/CAD enjoyed quite the outing this week.
For next week, that strength may remain in focus and the door could be open for continuation. There are a few pullback levels of note that could be investigated for support potential, such as the 1.7500 major psychological level or, perhaps a bit deeper, the 1.7432 Fibonacci level; each of which could keep the door open for a continuation of higher-highs and higher-lows.
GBP/CAD Technical Forecast: Bullish
GBP/CAD Daily Price Chart
— Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX