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GBP/USD technical analysis: client sentiment remains bullish

Retail traders remain short of GBP/USD as the post-Brexit trade talks near a point of no return. Will a deal be found?

GBP/USD technical outlook:

  • GBP/USD rally hitting resistance near multi-month high.
  • IGCS – Retail traders are bearish but sentiment is bullish.

GBP/USD has been stair-stepping higher after making a swing low around $1.2675 on 23 September as market participants price-in a post-Brexit trade deal of some description. It is highly unlikely that an in-depth deal will be made in time, if at all, and any trade deal between the EU and the UK is likely to be minimal and just enough to prevent the two parties trading on WTO terms from the start of next year. While Sterling is expected to move higher on the announcement of a successful EU-UK trade outcome, the expected lack of clarity of this deal may well temper any substantial GBP-upside.

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GBP/USD daily chart (December 2019 – 25 November 2020)

The daily chart shows that the pair remain above all three simple moving averages, a bullish set-up, while higher lows and higher highs also suggest that the recent rally may not be finished. A close and open above the $1.3516 high should keep the market biased to the upside.

IGCS – retail remain short of GBP/USD

Retail trader data shows 36.09% of GBP/USD traders are net-long with the ratio of traders short to long at $.77 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. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bullish contrarian trading bias.

IGCS client positioning - GBP/USD

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