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GBP/USD technical analysis – moving average support holds

The British Pound remains a strong currency but has had to cede ground to a robust US dollar of late.

GBP/USD technical outlook

  • Sterling rallying back against the US dollar
  • Retail traders are long GBP/USD and the outlook is mixed

GBP/USD is pushing higher in early trade with the pair approaching $1.39 and Friday’s high of $1.3907. The move has been helped by a slightly weaker US dollar - although the greenback trades near its three-month high – while Sterling remains a strong currency in its own right, as evidenced against the euro, Japanese yen and the New Zealand dollar.

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The daily chart shows that the 50-day simple moving average (SMA) - green line - has provided solid support for GBP/USD over the last five months and this seems to be the case again after the pair tried and failed lower over the last couple of sessions. GBP/USD now approaches the 20-day SMA (red line), a short-term indicator that had provided support of late but has now turned into short-term resistance after last week’s break lower. This resistance currently sits at $1.395.

MAs explained for trader

Retail trader data shows 52.82% of traders are net-long with the ratio of traders long to short at 1.12 to 1. The number of traders net-long is 3.60% higher than yesterday and 7.18% higher from last week, while the number of traders net-short is 7.48% higher than yesterday and 10.12% lower from last week. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall.

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

This information has been prepared by IG, a trading name of IG Markets Limited. 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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