British Pound, British Pound, GBP, GBP / USD, GBP / JPY, EUR / GBP Talking Points:
- It has been a surprising race of strength for GBP so far in the new year.
- GBP / JPY continues to erupt while GBP / USD recently joined the party. EUR / GBP has taken a key place on the chart as the strength of the GBP continues to exceed the euro.
- The analysis contained in the article is based on Price action and graphic training. To learn more about price action or chart patterns, check out our DailyFX Education section.
We are now in the middle of the first quarter of 2021 and it has been a rather surprising display of strength so far for the pound sterling. The currency is currently trading at a two-year high against the US dollar, and earlier this morning made a quick run to the 1.4000 level but fell just short of that. This force was also fully displayed against the two Japanese Yen and the euro, with each of GBP / JPY and EUR / GBP continuing to break in the direction of the strength of the pound.
GBP / USD is breaking the corner
Coming in February, GBP /USD had integrated into a very clear rising wedge formation, resistance holding at a key point on the chart. As the strength of the USD continues to hold, and the bulls GBP / USD have been thwarted by confluent resistance for more than two weeks, it looked like the GBP / USD pair could move lower soon, as bullish corners are often addressed with the aim of lowering. reversals.
But last week saw a strong bullish response as GBP / USD price action broke through that resistance; and it continued to happen this week as the pair took a brisk walk towards the psychological Handle 1.4000.
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GBP / USD Daily Price Chart
In the shorter term, this bullish breakout retains a healthy build, as evidenced by a continuing series of higher ups and downs. Price action retreated for a test of support around earlier resistance, around 1.3866. A little lower is another area of possible higher-low support for the continuation of the uptrend, and that traces 1.3759-1.3773, and below is the large earlier resistance area that doesn’t hasn’t really shown much for support yet, and it traces 1.3621-1.3714. This area might be of particular interest for longer term trend scenarios, and it can only come into play after a test of 1.4000 around the psychological level.
GBP / USD Four Hour Price Chart
Graphic prepared by James stanley; GBPUSD on Tradingview
GBP / JPY bursts
A recent rise in the pound sterling combined with a very weak Japanese yen has led to a one-sided move in GBP / JPY recently, with the pair reaching a new annual high.
As of 2021, the GBP / JPY had spent most of the last year digesting in a symmetrical triangle, often a digestion signal before a very big move.
That triangle started to give way in the New Year and buyers really took hold around mid-January. Prices crossed another watermark today by testing above the 147.00 level, but the problem at this point would be how overbought the pair has become. The daily RSI on the chart below is at its highest level since September 2017.
GBP / JPY Daily Price Chart
In the shorter term, GBP / JPY is relatively far from any nearby support, with the most recent swing-low hovering around 146.32. Slightly below is another area of potential support around the psychological level of 145.00.
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GBP / JPY four hour price chart
Graphic prepared by James stanley; GBPJPY on Tradingview
EUR / GBP: strong breakdown in 2021
The past two months have brought an abnormally directional trend in EUR / GBP, as the strength of the pound has outpaced the weakness of the euro since the end of December. The pair had found support around the 61.8% retracement of the major 2019-2020 move, but over the past few weeks this has been withdrawn quite aggressively to set a new nine-month low.
EUR / GBP Daily Price Chart
— Written by James stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX