GBPUSD Technical Analysis Update

• GBPUSD closed Friday down 0.71% as the dollar experienced broad based strength versus its major currency counterparts.  There has been a weekly drop of .29% and sterling is currently down 1.12% versus the dollar on a monthly basis.
• The following GBP relative strength chart shows the pound strength/weakness versus the other currency majors (JPY, USD, CHF, EUR and CAD)  and is not to be confused with the RSI indicator.  The daily GBP relative strength chart below shows sterling is testing key support and a sustained break below this level would add to the bearish picture.  Conversely, a failure to sustain below this level may see the pound move back into the range trading as per the recent price action.

GBP Strength Index Chart

• The GBPUSD daily candle chart below shows price is close to testing the ascending trend line.  A break below this level would still need to contend with multi-day support around 1.5800.  Nonetheless, the strong downside price action on Friday may see GBPUSD bears attempt to take cable through this near term key support level next week.
• The USDX (dollar index) created an inside candle over this past week after retracing deep into the bullish engulfing weekly candle.  Any sustained continuation of the strong dollar index recovery on Friday might see a break to the upside of the inside candle and potential confirmation trigger of the weekly engulfing line.   
• Large speculators were holding a net short position of  $1.3 billion in bearish wagers versus the GBP (CME) according to the latest COT report data. This is an increase of over twice the prior week’s reading.

GBPUSD Daily Chart