GBP/USD Technical Outlook: Has the British Pound Bottomed?

GBP/USD SHORT-TERM TECHNICAL FORECAST – NEUTRAL

This is a follow-up to the article published on October 3.

In a nutshell, there is not much evidence yet to conclude that the worst is over for GBP/USD. That’s because in recent weeks GBP/USD has remained confined within the September open-close range. While this can be interpreted as ‘wait-and-watch’, it could also imply a lack of conviction amongst market participants with regard to the future trend.

GBP/USD Monthly Chart

In this regard, at a minimum, a decisive break above a horizontal trendline from 2016 (at about 1.1450) would be an early sign that the medium-term downward pressure is fading. A stronger signal would be a rise above the August high of 1.2295, roughly coinciding with the 200-day moving average, which would confirm that the worst is over for GBP/USD.

Most immediately, the pair will need to crack the barrier on the 89-day moving average – it was last below the average in 2021. While GBP/USD stays below the 89-day moving average, a retest of the September low of 1.0385 (or below) can’t be ruled out completely. There are a few signposts to watch.

GBP/USD Daily Chart

A fall below the lower edge of a minor ascending channel from early October, around Friday’s low of 1.1145 would confirm that the short-term upward pressure had faded, risking a drop toward a vital cushion at the October low of 1.0925. The cable needs to hold above 1.0925 for the recovery trend to remain intact as a decisive break below 1.0925 could expose downside risks toward the end-September low of 1.0385.