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GBPUSD Dominated by Sellers, but Keep an Eye on These Two Levels

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The pound is about to close out its second red week in a row, down about 1.4% from Monday’s open.

GBPUSD has also carved lower highs and lows since last May. It all began with a retest of a multi-year channel resistance at 1.42 last year.

The GBPUSD weekly time frame below illustrates it well.

GBPUSD weekly time frame

So there’s our macro price structure for the pound. For the last six years, it’s essentially been sideways action amid a larger multi-decade downtrend.

But the downtrend over the last decade has primarily been a US dollar story.

Since 2011, the DXY (US dollar index) has gained 35%, a considerable move for the index. And the dollar’s ascent doesn’t appear to be slowing.

It’s up another 1% today and breaking above a 2011 trend line that it has tested as resistance for months.

DXY weekly trend line and break above
DXY weekly time frame

Until we see the DXY weaken, pairs like the EURUSD and GBPUSD will be dominated by sellers.

More specifically, the DXY needs to carve a first lower low, in this case below 95, to signal a bearish reversal. It’s nowhere close to that mark today.

As for the pound, it’s approaching a key support area at 1.316. That’s where it bounced in December.

However, unless we get an explicit bullish signal from that region, we’ll likely see a revisit of channel support at 1.295 later this month.

I’ll most likely take a renewed interest in GBPUSD in that area. Unless, as I stated, we see bullish price action from the 1.316 level.

But even then, any longs here are against the grain, so caution is needed.

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GBPUSD daily time frame

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5 comments
Justin Bennett says

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alex andalibfard says

thanks sir justin , good to have you back.

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    Justin Bennett says

    You’re welcome, Alex. Good to be back! 🙂 Cheers.

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Chuvks says

Thought is only me that miss your wonderful analysis.
Good you are back

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    Justin Bennett says

    Good to be back. 🙂

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