Cable (GBP/USD) Settles into Consolidation Channel
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Cable (GBP/USD) Settles into Consolidation Channel

Nov 18, 2023

Cable has headed lower after the since Friday's massive NFP beat and continues to test the zone of support around 1.2445 with secondary support appearing around 1.2345. The pair has exhibited moments where a directional move provided hope for a loner lasting trend to set it but has ultimately settled into more of a choppy, sideways trading environment.

As such, range trading strategies could become favourable, particularly with price action trading largely between 1.2345 and 1.2676. Breakout levels can be considered around 1.2345 to the downside and 1.2676 for a bullish breakout. Looking at the weekly chart, the longer-term bull trend would suggest that upside breakouts may carry more weight with prices trading well above the 200 SMA. Bulls ought to be aware of the massive zone of resistance at the psychological level of 1.2700 and the 61.8% Fibonacci retracement level of the 2021 to 2022 major decline (1.2750) which has kept bulls at bay thus far and provides a stern challenge to further upside.

GBP/USD Daily Chart

Source: TradingView, prepared by Richard Snow

The weekly chart shows the longer-term uptrend which is coming to an apex around the psychologically important 1.2700 mark. It would appear that a new bullish catalyst may be needed to extend above the zone of resistance which may not necessarily arrive next week. The Fed is likely to issue a hawkish pause – meaning that the rhetoric around the inflation and interest rate scenario is likely to warn of further hikes in the face of stubborn inflation despite potentially pausing on a hike for June. Markets are extremely hawkish when it comes to Bank of England rate hike expectations, currently pricing in another 90 basis points worth of hikes which could land up rivalling the Fed. Strong rate expectations appear to be supporting the pound but with a lack of a catalyst GBP/USD may continue on its current trajectory for some time.

GBP/USD Weekly Chart

Source: TradingView, prepared by Richard Snow

This week is rather quiet as far as high impact economic data is concerned, as is typically the case the week before the major central bank decisions. Next week, the Bank of England (BoE) will have some inflation-sensitive data to work with as UK average earnings data is due and crucial US inflation data will reveal if core price pressures can dip below the sticky 5.5% - 5.7% range.

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IG client sentiment has been switching from net long to net short and visa versa, which renders the contrarian indicator largely ineffective. Client sentiment provides stronger signals when markets are trending, preferably when markets are in a strong trending environment.

GBP/USD:Retail trader data shows 54.06% of traders are net-long with the ratio of traders long to short at 1.18 to 1.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall.

The number of traders net-long is 1.23% higher than yesterday and 7.99% lower from last week, while the number of traders net-short is unchanged than yesterday and 11.29% higher from last week.

Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed GBP/USD trading outlook.

--- Written by Richard Snow for

Contact and follow Richard on Twitter: @RichardSnowFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.