GBP/USD breaks below its multi-week range as a stronger US Dollar and soft UK data put focus on 1.3164 and 1.3000, with today’s bias favouring shorts below 1.3236.
This currency pair finally broke out of its medium-term consolidative area last week. We got some decisive catalysts for this, with a MoU between the USA and Iran signed, lower than expected UK inflation data, and the US Federal Reserve’s policy meeting giving a clear hawkish tilt as the “dot plot” changes to show a consensus expectation of one rate hike before the end of 2026, up from zero previously.
When the price is driven out of an area of comfort by a relevant central bank meeting, it is quite likely to be important to take note of that, as these fundamentally driven moments can be the start of major trend changes or reversals.
Is the Road Clear to More Direction?
Why is the current moment full of promise for traders of this currency pair? Because after mostly trading sideways for such a long time, we are seeing signs that things are becoming clearer, clarifying the outlook for this currency pair, both in terms of the British Pound and the US Dollar.
The British Pound does not have much at stake right now even though the Bank of England just held a policy meeting. The voting on a rate hike was slightly more hawkish than expected, but there was a strong majority in favour of holding. The vote hasn’t done much to hold up the Pount
On the side of the Dollar and general market sentiment, the US Dollar Index is firmer and is continuing to rise, looking likely to reach a new 1-year high today.
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GBP/USD Technical Analysis
We see the clear bearish breakdown below the range which was dominant for over one month now, between about $1.3300 and $1.3500. The price fell last week to make a new multi-month low price at $1.3164.
The price is currently looking a bit heavy as it sits on a support level which I do not have much confidence in at $1.3236. If this gives way, there will be nothing technical looking likely to stop the price falling to test the multi-month low at $1.3164 again, and this would be very likely to be the day’s pivotal point. At the time of writing a few minutes before the London open, the support level at $1.3236 does look as if it is breaking down already.
Below the support level at $1.3164 we have multi-month / year blue sky which the price should be easily able to cut through. The big round number at $1.3000 might be the next realistic target.
My Take on GBP/USD
I think day traders might look for short trade on bearish price action below $1.3236 targeting $1.3164. That support level might hold, at least for a while, so a long trade on a scalping basis might be a possibility. Finally, if there is a decisive bearish breakdown below $1.3164, a longer-term short trade, maybe even targeting $1.3000, could be taken.
Support & Resistance Levels
My previous GBP/USD signal on 18th June showed I was correct to expect the price to fall over the day, as it fell quite firmly after peaking at the resistance level of $1.3319.
Risk 0.75%.
Trades may only be entered prior to 5pm London time today.
Long Trade Ideas
Long entry following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.3164, $1.3100, or $1.3000.
Put the stop loss 1 pip below the local swing low.
Adjust the stop loss to break even once the trade is 25 pips in profit.
Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to run.
Short Trade Ideas
Short entry following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.3268, $1.3325, or $1.3391.
Put the stop loss 1 pip above the local swing high.
Adjust the stop loss to break even once the trade is 25 pips in profit.
Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to ride.
The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.
There is nothing of high importance scheduled today concerning either the US Dollar or the British Pound.
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