The British Pound is down nearly 4% off the January high with the price now approaching key near-term confluence support. The focus is on a reaction here with a break lower risking substantial losses for Cable.

GBP/USD DAILY PRICE CHART

Technical Outlook: Sterling broke below the weekly opening-range yesterday with the decline now approaching key confluence support at 1.3765/89– a region defined by the 23.6% retracement of the 2017 advance and the February opening-range low. Note that basic trendline support extending off the November swing lows also converges on this threshold over the next few days and could limit the downside near-term.

A break / close below this threshold would risk substantial losses for the pound with such a scenario targeting subsequent daily support objectives at the Brexit gap at 1.3675, the 2017 high-close at 1.3589 and critical support at 1.3500/40 (broader bullish invalidation for the primary uptrend & an area of interest for long-entries IF reached)

GBP/USD 240MIN PRICE CHART

Notes: A closer look at Sterling price action highlights a near-term descending pitchfork formation extending off the yearly highs. Interim resistance now stands at the highlighted slope confluence around ~1.39 with bearish invalidation now lowered to the 1.40-handle. A break here at the 1.3765/85 support zone eyes subsequent targets at 1.3675/85 backed closely by the 2017 high at 1.3658 and the 100% extension at 1.3562.

Bottom line: This is a significant pivot and we’re looking for a reaction here with the immediate downside bias at risk while above this support zone. A daily close below this level would be needed to keep the focus lower – ultimately, a larger set-back would offer more favorable long-entries with a breach above 1.40 needed to mark resumption of the broader up-trend. From a trading standpoint, I’ll be looking for a possible near-term exhaustion trade while above this threshold before breaking lower.