Sterling Talking Points
- GBP/USD is nearing levels last seen in June 2016 and may push higher in the short-term.
- Sterling positioning data points to GBP/USD rallying further.
GBP/USD has started the year in robust fashion and looks set to continue its positive run. The current lull in Brexit commentary is helping Sterling to push higher as negative headlines disappear, while in the US the Trump tax cuts are not seen as a driving force behind higher interest rates. Today’s FOMC minutes may give greater clarity to the Fed’s intentions in the short-term.
GBP/USD is currently trading within 1 cent of levels last seen on June 20, 2016, the day that the UK voted to leave the European Union. A breach and close above the September 20, 2017 high of 1.36550 will open the way to 1.4000 or higher. From a technical stance, GBP/USD now trades above the 100-day ema while the stochastic indicator is pointing higher, both positive set-ups.
GBPUSD Price Chart Daily Timeframe (August 2017 – January 3, 2018)
GBPUSD Client Positioning Data Posts a Bullish Shadow
IG Client Sentiment data show 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. The number of traders net-long is 13.5% higher than yesterday and 14.9% lower from last week, while the number of traders net-short is 24.3% higher than yesterday and 51.7% higher from last week. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD 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 GBPUSD-bullish contrarian trading bias.
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--- Written by Nick Cawley, Analyst
To contact Nick, email him at nicholas.cawley@ig.com
Follow Nick on Twitter @nickcawley1
