Bullish GBP/USD signal from IG client sentiment data

The number of retail traders expecting GBP/USD to fall is growing, and from a contrarian standpoint that suggests an extension of the pair’s recent strong advance.

Bullish signal for GBP/USD

  • Retail traders are net short GBP/USD and the number of net short traders is growing.
  • From a contrarian standpoint, that suggests further gains for the pair, which has already moved steadily higher this month.

GBP/USD net short positions high and rising

Positioning data from retail traders using IG show that almost two-thirds of them are now net short GBP/USD, with the ratio of traders short to long at 1.8 to 1. The number of traders net long is 6.8% lower than on Tuesday but 2.9% higher than last week. Importantly, though, the number of traders net short is 8.8% higher than on Tuesday and 2.9% higher than last week.

At DailyFX, IG’s news and research website, we typically take a contrarian view to crowd sentiment, and the fact traders are net short suggests GBP/USD prices may continue to rise. Moreover, traders are further net short than on Tuesday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bullish contrarian trading bias.

The signal comes after a strong run higher for GBP/USD throughout the month of July, with the pair climbing from a low at $1.2251 on 29 June to $1.2969 on 29 July . After such a climb, a period of consolidation might be expected but the sentiment data suggest that $1.30 is now possible near term and that an extension to the 9 March high at $1.32 cannot be ruled out.

GBP/USD price chart, daily time frame (5 March 2020 – 29 July 2020)

This information has been prepared by IG, a trading name of IG US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. Any research provided should be considered as promotional and was prepared in accordance with CFTC 1.71 and designed to promote the independence of investment research. See our Summary Conflicts Policy, available on our website.

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