GBP/USD Monthly Technical Analysis for December 2016

The British Pound bucked the trend of the other currencies in November with a higher close against the U.S. Dollar. The GBP/USD closed the month at 1.2505, up 0.0265 or 2.17%. The Forex pair posted an inside move, indicating investor indecision and impending volatility.

Unlike the other major currencies, the British Pound actually firmed for two days following the election of Donald Trump as president on November 8. After that it drifted sideways to lower, but proved to be resilient enough to reach another low on November 18 before moving sideways to slightly higher into the end of the month.

Traders said the British Pound strengthened because Donald Trump’s unexpected election triumph will produce a U.S. administration that will sympathize with the U.K.’s Brexit decision. During his campaign, Trump emphasized that the U.S. and the U.K. will continue to enjoy a “very special” relationship. According to Bloomberg, Trump trade advisor Dan DiMicco has claimed the U.K. would get priority status as America’s ‘friend’ and was leaving the EU for good reasons. This is completely different from President Obama, who famously said that Brexit would see Britain go to the “back of the queue” for trade deals with the U.S.

Forecast

The main trend is down according to the monthly swing chart. The GBP/USD is far from changing trend, but last month it did stop its price slide which indicates there is some buying going on. Given the November close at 1.2505 and the current volatility, it’s not going to take much to take out October’s high at 1.2946, which would make 1.1739 a new minor bottom.

The first support is a long-term uptrending angle at 1.2427. This angle may act like a pivot this month.

A sustained move over 1.2427 will indicate the presence of buyers with the first target the November high at 1.2673, followed by the October high at 1.2946. This could be the trigger point for an extension into a downtrending angle at 1.3096, followed by a 50% level at 1.3378.

If the market fails to hold above 1.2427 then we could see a continuation of the selling pressure with the October low at 1.1739 the next target, followed by another long-term uptrending angle at 1.1482.

Watch the price action and read the order flow at 1.2427 in December. This should tell us if the buyers or the sellers are in control.