CFDs are complex instruments. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money. CFDs are complex instruments. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.

GBP/USD price outlook: pound-dollar to probe 2018 swing high

Pound sterling bulls propel GBP/USD price action within reach of its 2018 swing high, but can the cable maintain upward momentum?

Pound sterling strenght propelling GBP/USD to 35-month high

  • GBP/USD pierces the $1.40-price level for the first time since early 2018
  • Pound sterling gaining ground as UK lockdowns are lifted post-Brexit deal
  • Broader US dollar weakness could exacerbate GBP/USD buying pressures

GBP/USD price action has been ripping higher over the last two and a half weeks. Since its early-February low, the pound-dollar has surged 500 pips and now trades at its highest level in nearly three years. Improving outlook for the UK economy, largely stemming from easing Covid-19 restrictions and reduced uncertainty given the recent Brexit trade deal, stands out as a primary driver fueling pound sterling strength. GBP/USD has likely benefited from broad US dollar selling as well.

GBP/USD price chart: weekly time frame (September 2017 to February 2021)

That said, the pound sterling could continue gaining ground against its US dollar peer and extend its rally deeper into 2018 highs. Though the relative strength index on a weekly chart suggests GBP/USD price action hovers in ‘overbought’ territory, bullish momentum has re-accelerated as highlighted by the moving average convergence/divergence (MACD) indicator, and Bollinger band width expansion also helps facilitate upside potential. GBP/USD bulls might look to the 8-week and 20-week simple moving averages (SMAs) as possible technical support zones if a consolidation lower materialises.

GBP/USD price chart - IG client sentiment: weekly time frame (23 February 2021)

While there currently is a mixed trading signal for GBP/USD according to the latest IG client sentiment (IGCS) data, the vast majority of retail traders remain net-short. Not to mention, there was an -11% weekly decrease in long positioning. Seeing that we typically look at IGCS through the lens of a contrarian, this suggests that the bullish GBP/USD price trend may continue.

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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