The British pound has had a tough week against the US dollar currency with the pair falling back towards the 1.3800 support zone after failing to hold the price above the 1.3900 resistance zone.
Weakness in sterling appears to be largely driven by strength in the US dollar index, and also technical selling. News surrounding UK coronavirus cases and variants, and a reshuffle in the UK Conservative parties cabinet was not seen as being a big price mover for the British pound.
The loss of the 1.3900 support level meant that a breakout from a large ascending wedge pattern took place. GBPUSD bulls need to quickly anchor the price back above the 1.3900 level to avoid a further technical decline towards the 1.3750, and possibly the 1.3660 price area.
UK Gross Domestic Product this week confirmed that the United Kingdom economy contracted in the first fiscal quarter, however, with markets being forward looking Q2 GDP data from the UK, which when released will be a much bigger market mover this month.
This week’s Non-farm payrolls job report could be a big market mover for sterling in the near-term. A softer than expected headline number could propel sterling back to the 1.4000 area as traders and investors pare back expectations of QE purchases being reduced later this year.
According to the ActivTrader Market Sentiment tool shows that some 42 percent of traders remain bearish towards the GBUSD pair right now. This is a drop of 10 percent since last week. The bullish sentiment skew is still warning about further losses.
GBPUSD Short-term Technical Analysis
Looking at the four-hour time frame, the GBPUSD pair has broken under a large ascending triangle pattern, following the recent loss of the 1.3900 support level. According to the overall size of the pattern a decline of 100 point should be expected.
It is also possible that if the GBPUSD pair moves above the 1.3900 and heads towards the top of the patter, around 1.4000, then a counter rally towards the 1.4100 resistance level could take place.
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GBPUSD Medium-term Technical Analysis
According to the daily time frame a bullish breakout from a large falling price channel took place earlier this year, and the GBPUSD pair may be headed for a retest of the key breakout area
If bears take control under the 1.3800 level, watch out for a technical test of the falling price channel, around the 1.3710 level. This is a must bounce level if the GBPUSD pair has any chance of getting back to the 1.4000 level.
Failure for GBPUSD bulls to defend the 1.3710 level then a decline towards the 1.3600 to 1.3500 area is also possible.
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