We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bearish
GBP/USD
Mixed
USD/JPY
Bullish
Gold
Bullish
Oil - US Crude
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Bitcoin
Bearish
More View more
Notice

DailyFX PLUS Content Now Available Freely to all DailyFX Users

Real Time News
  • Missed today's #AUDUSD weekly outlook webinar? See the recording here - https://t.co/J4cnRMGNi8
  • Crude Oil Prices May Idle as the FOMC Regains the Spotlight - https://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/commodities/2019/09/17/Crude-Oil-Prices-May-Idle-as-the-FOMC-Regains-the-Spotlight.html?utm_source=Twitter&utm_medium=Spivak&utm_campaign=twr #CrudeOil #OOTT
  • US Energy Secretary Perry says the US is taking a wait and see approach as to whether to use SPR
  • Lessons from Bretton Woods are forgotten, the US-China #tradewar represents a true existential threat to the post-World War II international trade order, and in turn, the globalized economy that has grown out of the ashes of history. More from @CVecchioFX :https://t.co/paaBxX6Xt0 https://t.co/TBxNcA745X
  • Another headache for the Riksbank as the Swedish labour market worsens - Unemployment rate 7.1% - Seasonal adjusted figure at 7.4% Notably above the Riksbank's forecast in its September monetary policy report $SEK https://t.co/5dhRRMvp2B
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 97.89%, while traders in France 40 are at opposite extremes with 80.28%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/MRpMVcygyC
  • Saudi Oil Minister press conference is set to take place from 18:15BST #OOTT
  • Commodities Update: As of 07:00, these are your best and worst performers based on the London trading schedule: Gold: -0.20% Silver: -0.34% Oil - US Crude: -0.97% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/SKWxoMbOFk
  • RT @LiveSquawk: 18:15 BST #OOTT https://t.co/uWBjXgfXlF
  • Forex Update: As of 07:00, these are your best and worst performers based on the London trading schedule: 🇪🇺EUR: 0.01% 🇯🇵JPY: -0.05% 🇨🇭CHF: -0.08% 🇬🇧GBP: -0.18% 🇳🇿NZD: -0.30% 🇦🇺AUD: -0.48% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/Y0mbFgtDou
GBPUSD Retail Position Remains Stretched, RSI Dips into Oversold Zone

GBPUSD Retail Position Remains Stretched, RSI Dips into Oversold Zone

2019-07-30 05:00:00
David Song, Currency Strategist
Share:

British Pound Talking Points

GBPUSD tumbles to a fresh yearly low (1.2156) ahead of the Bank of England (BoE) meeting on August 1, and current market conditions may produce a further decline in the exchange rate as retail position remains stretched, while the Relative Strength Index (RSI) pushes into oversold territory.

GBPUSD Retail Position Remains Stretched, RSI Dips Into Oversold Zone

The British Pound extends the decline from earlier this week as Prime Minister Boris Johnson pushes for new Brexit deal, with spokeswoman Alison Donnelly insisting that “the prime minister will be happy to sit down with leaders when that position changes.”

The comments suggest the new prime minister is in no rush to meet with European Union (EU) leaders even though there’s less than 100 days left till the October 31 deadline, and headlines surrounding Brexit may continue to shake up the near-term outlook for the British Pound especially as Nicola Sturgeon, the First Minister of Scotland, warns that Mr. Johnson “is really pursuing a no-deal Brexit because that is the logic of the hardline position that he has taken.

The growing threat of a no-deal Brexit may push the BoE to alter the forward guidance as “the economic outlook will continue to depend significantly on the nature and timing of EU withdrawal,” and the updates to the quarterly inflation report (QIR) may highlight a different path for monetary policy as the current assessment is based on the “assumption of a smooth Brexit.”

In turn, the Monetary Policy Committee (MPC) may adopt a dovish tone as “underlying growth in the United Kingdom appears to have weakened slightly in the first half of the year relative to 2018,” and Governor Mark Carney and Co. may prepare UK households and businesses for lower interest rates as the central bank warns “downside risks to growth have increased.

A downward revision in the BoE’s economic projections along with a material shift in the MPC’s forward guidance is likely to produce headwinds for the British Pound, but retail positions remains skewed even though GBPUSD trades to fresh yearly lows.

Image of IG client sentiment

The IG Client Sentiment Report shows81.2%of traders are still net-long GBPUSD compared to 78.0% last week, with the ratio of traders long to short at 4.31 to 1.

In fact, traders have remained net-long since May 6 when GBPUSD traded near the 1.3100 handle even though price has moved 7.2% lower since then.The number of traders net-long is 1.5% higher than yesterday and 14.1% higher from last week, while the number of traders net-short is 1.7% lower than yesterday and 31.5% lower from last week.

The drop in net-short position points to profit-taking behavior as GBP/USD trades to fresh 2019 lows, but the ongoing tilt in net-long position offers a contrarian view to crowd sentiment as the exchange rate tracks a bearish trend, with the Relative Strength Index (RSI) highlighting a similar dynamic.

Sign up and join DailyFX Currency Strategist David Song LIVE for an opportunity to discuss potential trade setups.

GBP/USD Rate Daily Chart

Image of gbpusd daily chart

  • Keep in mind, the broader outlook for GBP/USD is no longer constructive as the exchange rate snaps the upward trend from late last year after failing to close above the Fibonacci overlap around 1.3310 (100% expansion) to 1.3370 (78.6% expansion).
  • The recent series of lower highs and lows keeps the downside targets on the radar for GBPUSD, with the break/close belo w 1.2240 (61.8% expansion) bring the 1.1890 (61.8% expansion) 1.1950 (78.6% expansion) region.
  • At the same time, recent developments in the Relative Strength Index (RSI) suggests the bearish momentum is gathering pace as the oscillator breaks below 30 and pushes into oversold territory.

For more in-depth analysis, check out the 3Q 2019 Forecast for the British Pound

Additional Trading Resources

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019.

--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.

provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.