GBPUSD Price Outlook: More Gains Possible
GBPUSD price analysis:
- GBPUSD has broken higher after trading within a bearish descending triangle chart pattern for the past two months.
- That suggests further gains to come, with IG Client Sentiment data also pointing to future strength.
Sterling outlook positive
GBPUSD traded for almost two months within a descending triangle pattern on the charts. That usually ends with a break to the downside, and that indeed happened. However, the price has now recovered all its losses and jumped above the resistance line joining the previous lower highs – suggesting further gains to come.
GBPUSD Price Chart, One-Hour Timeframe (March 4 – May 1, 2019)
Chart by IG (You can click on it for a larger image)
The price has also clambered above the psychologically important 1.30 level and, as the chart above shows, the 100-hour moving average is now close to crossing above the 200-hour moving average. If it does, that would be another bullish signal. Note too that the 14-hour relative strength index below the main chart is no longer above the 70 level signaling that the market has been overbought.
The next targets could well be the 1.3119 high touched on April 15, followed by the 1.3133 high reached on April 12, with support coming in at 1.30 and then around 1.2980, where the previous resistance line lies.
Bullish signal from IG Client Sentiment data
This positive technical picture is supported by IG Client Sentiment data. An analysis of where retail traders using IG are positioned shows 62.6% are net-long, with the ratio of traders long to short at 1.68 to 1. In fact, traders have remained net-long since March 26, when GBPUSD traded near 1.32058; the price has moved 1.0% lower since then. However, the number of traders net-long is 14.4% lower than yesterday and 17.7% lower from last week, while the number of traders net-short is 29.5% higher than yesterday and 51.5% higher from last week.
At DailyFX, we typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPUSD prices may fall back again. Yet traders are less net-long than yesterday and compared with last week, and these recent changes in sentiment back the view that the GBPUSD price may extend higher despite the fact traders remain net-long.
If you’d like to learn more about using the IG Client Sentiment data, listen in to my weekly webinars every Wednesday at 1130 GMT (1230 BST). Our webinar calendar is here.
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--- Written by Martin Essex, Analyst and Editor
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.