GBP/USD rate outlook bearish on rising net-long bets

The British pound may fall against the US dollar on rising net-long bets after GBP/USD left behind a couple of bearish technical signals after March's highs held.

British pound IG client sentiment - talking points

  • British pound may fall on rising net-long bets
  • GBP/USD at risk to bearish technical signals
  • Highs from March eyed for uptrend resumption

GBP/USD IG client sentiment outlook

The British pound could be on the verge of reversing its dominant uptrend against the US dollar amid rising net-long positioning. From the beginning of September until 13 December, GBP/USD climbed over 10% as those betting on a continuation in trend shrunk. This took overall net-long positioning from about 75% to a low of roughly 40% during the same period, as reported via IG client sentiment.

On 18 December, retail trader data showed that about 65.17% of GBP/USD traders were net long. This was 11.73% and 60.61% higher over a daily and weekly period respectively. The combination of current sentiment and recent changes offers a stronger GBP/USD-bearish contrarian trading bias. From a psychological perspective, this could speak to more investors attempting to pick the next bottom.

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GBP/USD Client Positioning

British pound technical analysis

Accompanying the sentiment outlook are more signs of a top in the British pound from a technical perspective. Prices struggled to break above a descending trend line from June 2015, leaving behind a shadow. This is as highs from March held, reinforcing key resistance as a range between 1.3304 and 1.3381. Now, GBP/USD is attempting to confirm a daily close under near-term rising support from October.

The pair has also left behind an Evening Star candlestick pattern which carries bearish implications. A continuation of near-term weakness places the focus on former resistance which may stand in the way as support at 1.2950 to 1.3013. Taking this barrier out then exposes a potential rising support line from September. Otherwise, turning higher places the focus on 1.3177 before revisiting early December highs.

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GBP/USD Daily Chart

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