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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.


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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