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GBP/USD sentiment shift helps bullish case

Cable is on the rise as traders are fading the break higher; this may bode well for higher prices in the days ahead.

GBP/USD sentiment, price, and analysis

  • GBP/USD trading at its best levels since early June
  • Client position changes supportive of further gains

The British pound is rallying versus the US dollar, and with broad USD weakness becoming a central theme we may see further upside in GBP/USD in the days ahead. Recent changes in trader positioning data further backs the notion a breakout may be sustainable.

GBP/USD IG Client Sentiment

The IG Client Sentiment index (IGCS) show retail traders selling into multi-week highs, with only 41.55% net-long. The number of traders net-long is 6.60% lower than yesterday and 6.37% lower from last week, while the number of traders net-short is 28.14% higher than yesterday and 9.40% higher from last week. This suggests that traders aren’t so much lessening their long positions but outright shorting the pair.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short and increasing these bets suggests GBP/USD prices may continue to rise.

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GBP/USD technical outlook

Supporting the sentiment outlook is the fact that cable is trading at its best levels since the early part of June. It is also trying to cross above the 200-day moving average (MA), a threshold it has struggled with on a few occasions since April. A daily close above the long-term moving average could quickly lead to a rise to the June high at 12,813, where we will have to evaluate whether it will take out resistance (strong momentum) or turn back lower again (weakening momentum).

GBP/USD daily chart

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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