Sterling Technical Forecast: GBP/USD, GBP/JPY

British Pound Key Points:

• Sterling tumbled against the greenback this week as the USD's Q4 surge persisted, sending GBP/USD down to levels not seen since mid-summer.GBP/JPY reversed course Friday after encountering resistance at 198.08, breaking below symmetrical triangle support and negating the bull pennant setup.Both GBP/USD and GBP/JPY will be covered in our upcoming Tuesday technical analysis webinar. Join us here: Click here for registration information.

Sterling struggled mightily this week. For GBP/USD, this has been the predominant theme throughout Q4 as an intense dollar rally has impacted most major currencies. Meanwhile, GBP/JPY's potential upside breakout, signaled by a bull pennant formation, was completely dismantled during Friday's aggressive sell-off.

The critical technical development for Cable this week was the breach below the 200-week moving average, which had served as a floor for two consecutive weeks. The subsequent bounce encountered resistance at the 1.3050 Fibonacci level, where sellers maintained control. The current challenge lies in the extended nature of the DXY move, with daily RSI showing overbought conditions while price tests resistance from last year's gap.

This dynamic manifested as support in GBP/USD at the 50% retracement of the 2023-2024 major move, which came into play during Friday's late session.

GBP/USD Weekly Chart

Chart prepared by James Stanley, GBP/USD on Tradingview

GBP/USD Daily

Beyond the 200-week MA breach, Cable also surrendered the 200-day moving average during Tuesday's breakdown. However, the chase-down risk is significant with daily RSI approaching oversold territory, coinciding with DXY's overbought readings.

Bears might find opportunity in a retracement scenario, with two key levels worth monitoring: The 1.2811 mark holds particular significance due to its confluence between Fibonacci and the 200-day MA. A retest here could signal profit-taking exhaustion in the downtrend, offering bears a chance to defend a crucial technical junction. Alternatively, if that level remains untested, the 1.2750 psychological barrier could serve as a platform for bearish continuation if sellers maintain control.

GBP/USD Daily Price Chart

Chart prepared by James Stanley, GBP/USD on Tradingview

GBP/JPY

While Cable extended its Q4 decline, GBP/JPY witnessed a more dramatic shift as Friday's action severely compromised its previously bullish trajectory. The pair demonstrated strength through Q3's conclusion with a rapid approach toward 200.00, but this level proved to be a turning point for bulls.

Last week's price action produced a lower-high accompanied by a higher-low, creating a symmetrical triangle formation. Combined with the preceding uptrend, this suggested a bull pennant setup.

Friday's decline invalidated this pattern as price broke below the 195.66 former resistance level. While the sharp nature of the move presents trading challenges, attention now turns to a deeper support zone between 193.61-194.11. With four hours remaining in the weekly session, the 195.00 level has contained the downside. This setup creates potential for a bounce toward resistance at former support, with 195.66 and 196.52 serving as key levels to watch.