British pound (GBP) forecast: GBP/USD dips supported, EUR/GBP holds range
GBP/USD outlook bullish as uptrend remains intact, despite recent setback. EUR/GBP fails to break out of range.
GBP/USD drops to key $1.40 pivot
Inflation concerns continue to weigh on risk sentiment and while Federal reserve (Fed) speakers were quick to talk down yesterday’s inflation report (4.2% vs 3.6% expected), the size of the beat will make it hard to argue that this is solely down to transitory factors.
The market response to the data saw the USD push higher, alongside US yields, which in turn has seen GBP/USD back towards the $1.40 pivot. That said, the outlook remains constructive for cable as highlighted by yesterday’s better than expected gross domestic product (GDP) report, while on the technical front, the 100-daily moving average (DMA) keeps GBP risks tilted to the upside. As such, the February peak remains a key target for GBP bulls.
GBP/USD chart: daily time frame
IG GBP/USD client sentiment
Data shows 35.00% of traders are net-long with the ratio of traders short to long at $1.86 to $1.00. The number of traders net-long is 1.22% higher than yesterday and 31.73% lower from last week, while the number of traders net-short is 10.56% lower than yesterday and 30.18% higher from last week.
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.
EUR/GBP remains rangebound
EUR/GBP: Despite the sizeable pullback at the beginning of the week, the cross remains rangebound, which will likely persist in the short run.
Further downside is largely protected by support at £0.8530- £0.8540, while on the topside near-term resistance is situated at the 50DMA (£0.8615) with the key resistance residing at the range top £0.8720- £0.8730.
EUR/GBP chart: daily time frame
IG EUR/GBP client sentiment
Data shows 61.02% of traders are net-long with the ratio of traders long to short at £1.57 to £1.00. The number of traders net-long is 2.35% lower than yesterday and 4.71% higher from last week, while the number of traders net-short is 2.69% lower than yesterday and 22.27% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/GBP prices may continue to fall.
Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/GBP-bearish contrarian trading bias.
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