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The British pound suffered a hammering against the US dollar currency last week, as the GBPUSD pair slipped below the 1.3500 handle for the first time since 2020 due to a big breakout in the US dollar index.
Sterling is currently posting a modest rebound, with much to play for ahead of this week’s two main events for the GBPUSD pair, which are the release of the UK PMI Services report, and the September US jobs report.
The September jobs report is likely to decide the fate of sterling and whether we see the British pound trading in a new price range sub the technically important 1.3500 level or a recovery to the 1.3700 level.
On the technical front, the 1.3600 level is a big level to watch this week. The 1.3600 level is the key weekly pivot for the GBPUSD pair. We briefly saw some strength above this level in early-week trade.
I suspect the big battle is going to be between the 1.3510 to 1.3700 price range. Watch out for the next big move once we see this range broken. Something to bear in mind is that the GBPUSD pair is extremely oversold, making early-week rebounds likely.
Plus the technical may take a back seat to the events surrounding the US Jobs situation this week as Friday’s jobs report is likely to determine whether the FED decide to taper QE this year or not.
According to the ActivTrader Market Sentiment tool shows that some 81 percent of traders remain bullish towards the GBUSD pair right now. This is a slight increase in sentiment since last week.
The bullish sentiment skew is very worrying. Ideally, bullish sentiment will start to decline as the GBPUSD pair starts to recover. With sterling losing over 200 points since last week, traders are still not deterred.
GBPUSD Short-term Technical Analysis
Looking at the four-hour time frame, the GBPUSD pair has formed a large, inverted head and shoulders pattern, which suggests that a bounce back towards the 1.3600 resistance level could be coming.
The GBPUSD pair needs to continue to recover from the 1.3600 area and take out the 1.3750 level if a sustainable price recovery back to last month’s high is coming.
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GBPUSD Medium-term Technical Analysis
According to the daily time frame a massive, inverted head and shoulders pattern continues to play out, with the latest price pullback a final technical test of this important price pattern.
Failure for GBPUSD bulls to defend the 1.3510 level this week would be simply disastrous for the GBPUSD pair. A loss of the area could spark a test of the 1.3380 level, while a rebound keeps long-term bullish view intact.
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