GBP/USD technical analysis – positive trend remains intact

The British pound remains underpinned with the recent weakness in the GBP/USD likely to be short-term.

GBP/USD technical outlook

  • Sterling – short-term weakness, longer-term strength.
  • Retail traders are effectively flat of GBP/USD and the outlook is mixed.

GBP/USD is currently trapped between $1.366 and $1.40 with conflicting trends keeping the pair trapped. The longer-term uptrend remains in place, and dominant, while the short-term sell-off, from the 24 February high, is keeping downward pressure on GBP/USD. Sterling is, however, underpinned by a strong vaccination program that has seen around 47% of the UK population having already had at least one vaccine jab. This program – and the hope that the UK economy can rebound quicker than expected - has helped to push sterling’s trade weighted index (TWI) back to highs not seen since 2016.

Sterling trade weighted index – 6 April 2021

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GBP/USD stuck between two trends

The daily chart highlights the two different trends running GBP/USD at present. A series of short-term lower highs from late February are countered by an even shorter-term series of higher lows off the late March double low around $1.367 and this pattern will need to break before a new move can be called with confidence. The 20-day simple moving average (SMA), red line, is now in-play again and acting as support, although it is currently under pressure, while the 50-day SMA (blue line) will also need to be reclaimed if GBP/USD is to run higher. The $1.367-$1.40 range is expected to hold in the short term.

MAs explained for traders

GBP/USD daily price chart (June 2020 – 6 April 2021)

Retail trader data show 48.95% of traders are net-long with the ratio of traders short to long at 1.04 to 1. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/USD prices may continue to rise. Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed GBP/USD trading bias.

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