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GBP/USD uptrend slowing, rising short bets could bode well

GBP/USD extended gains above the 2007 trendline, but momentum is fading. Recent shifts in retail trader positioning hint that sterling could resume its advance.

GBP/USD technical analysis: talking points

  • GBP/USD extends climb above the 2007 trendline
  • Retail trader positioning shows Sterling may gain
  • March 2020 trendline and 100-day SMA in focus

British pound technicals

On the weekly chart, GBP/USD extended gains after pushing above a key falling trendline dating back to 2007, as expected. However, prices were unable to pierce through peaks from 2018, making for a key zone of resistance between $1.4278 and $1.4377. While there has been a near-term pullback, the 20-week simple moving average (SMA) seems to be maintaining the upside focus for the time being.

Find out more about trading GBP/USD and forex

GBP/USD weekly chart

Zooming in on the daily chart shows a more cautious picture. GBP/USD broke under rising support from March 2020. But, prices established support at $1.3671 and turned back higher to retest the trendline. The 100-day SMA also kept the dominant focus to the upside. So with that in mind, pushing back above rising support could open the door to retesting the February peak. Otherwise, the pair may turn lower and retest the 100-day SMA. Taking out the latter could bring the focus back to the $1.3396–$1.3515 inflection zone.

GBP/USD daily chart

GBP/USD IG client sentiment outlook

Meanwhile, IG client sentiment (IGCS), which is typically a contrarian indicator, seems to paint a rosy picture for the British pound ahead. It showed that on 21 April, about 38% of retail traders were net-long GBP/USD. Downside exposure had increased by 7.02% and 57.43% over a daily and weekly period, respectively.

This is as upside bets decreased by 2.15% and 43.95% over identical timeframes. The fact that traders are net short suggests that the pair may continue to rise, and recent changes in sentiment offer a stronger GBP/USD bullish contrarian trading bias. From a psychological perspective, this could mean a scenario where traders continue to increasingly bet on topping as prices climb.

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