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
Mixed
GBP/USD
Bullish
USD/JPY
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
Gold
Bullish
Oil - US Crude
Mixed
Bitcoin
Bearish
More View more
Real Time News
  • As we head into next week, Cable is continuing to digest the massive leg higher last month, which at some point soon could mean another surge. Get your $GBPUSD technical analysis from @PaulRobinsonFX here: https://t.co/LJ42YhDe3X https://t.co/5hGwhGBpLB
  • Asia’s vast and growing importance to the world economy is not yet matched by the presence of a currency trading center to rival the established order. Get your update on market drivers in Asia from @DavidCottleFX here: https://t.co/E2hqoRdO7q https://t.co/urMnUCq4fn
  • RT @markets: White-hot pot stocks have flamed out in spectacular fashion https://t.co/3GsVsRyZaZ
  • What is the best time to trade #forex? Find out: https://t.co/M9R46r5ewa #tradingstyle https://t.co/gJ1QDrox67
  • #Gold prices may be given a tailwind from the FOMC minutes and escalating trade war risks if they fuel demand for anti-fiat assets amid expectations of additional Fed easing. Get your $XAUUSD market update from @ZabelinDimitri here: https://t.co/OJ7WUY9W7E $gld https://t.co/kBp3opzptm
  • Why should you set trading goals? How can it help regardless of what your #tradingstyle is? Find out: https://t.co/AYdD7ODlv1 https://t.co/G0ftVurNNN
  • Manning the penalty box today...i hope there aren't too many visitors https://t.co/1y81Li7laL
  • Do you think your #tradingstyle is of a #FOMO trader? Find out how you can turn that to #JOMO? Find out: https://t.co/79Q4pYdVEd https://t.co/S82AOd5AeP
  • What are the truths and lies of #forex trading regardless of your #tradingstyle here: https://t.co/uF75VPzstr https://t.co/xJ808KvLxr
  • RT @PaulMDomenick: “But Paul, I don’t have a mentor!! Really? •Do you have YouTube? You have a mentor! •Do you have a bookstore? You hav…
GBPUSD Outlook: From a Contrarian Perspective, a Sterling Rally is Due

GBPUSD Outlook: From a Contrarian Perspective, a Sterling Rally is Due

2019-07-11 11:00:00
Martin Essex, MSTA, Analyst and Editor
Share:

GBP price, news and analysis:

  • Sir Richard Branson has warned that a no-deal Brexit could cause the British Pound to plummet to parity with the US Dollar.
  • When confidence in Sterling is so low, contrarians might argue that a GBP rally is now on the cards.

GBPUSD outlook: ripe for a recovery

The British Pound has fallen so far against the US Dollar since GBPUSD hit a 2019 high of 1.3382 on March 13 that a rally cannot be ruled out. As the chart below shows, the pair is clearly trending lower. However, it now looks to be forming a base around the 1.25 level and, if that holds, a short-term recovery could be due.

GBPUSD Price Chart, Daily Timeframe (January 1 – July 11, 2019)

Latest GBPUSD price chart.

Chart by IG (You can click on it for a larger image)

The tumble in GBPUSD has been due principally to growing fears of a no-deal Brexit if, as seems likely, former UK Foreign Secretary Boris Johnson becomes the next leader of the ruling Conservative Party and therefore the next British Prime Minister. However, it is possible that such an outcome is now fully priced in to exchange rates.

Trading GBP When a New Tory Leader Takes on Labour

Moreover, Wednesday’s UK economic data were less bad than feared. GDP growth in May, on a three months/three months basis, beat expectations at 0.3% and the construction sector performed well that month – offsetting poor industrial production and manufacturing output numbers. That makes a further easing of UK monetary policy marginally less likely.

GBP to fall to parity with US Dollar?

In addition, Sir Richard Branson, the founder of the Virgin group, was reported Wednesday as saying that a no-deal Brexit would cause the Pound to plummet and be worth the same as the Dollar. Contrarians argue that when sentiment is so negative a recovery is overdue.

Sterling index steady

On the other side of the GBPUSD pair, the markets are now pricing in a 26.5% chance that the Federal Open Market Committee will cut US interest rates by half a percentage point on July 31 – up sharply since the first leg Wednesday of Fed Chair Jerome Powell’s semi-annual report to Congress. If that is delivered, the US Dollar could well weaken.

That said, a couple of cautionary notes need to be mentioned. First, negative sentiment towards GBP has been much less pronounced recently when looking at a chart of Sterling since the Brexit referendum against a basket of other currencies.

Sterling effective exchange rate index, January 2005 = 100, (January 4, 2016 – July 11, 2019)

Latest sterling price chart.

Source: Bank of England

Second, positioning data on retail traders using the IG platform are currently neutral. They show that 82.2% of traders are currently net-long, with the ratio of traders long to short at 4.63 to 1. In fact, traders have remained net-long since May 6, when GBPUSD traded near 1.2911; the price has moved 2.9% lower since then. The number of traders net-long is 6.2% lower than yesterday and 10.4% higher from last week, while the number of traders net-short is 1.0% lower than yesterday and 10.8% lower from last week.

At DailyFX we typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests the GBPUSD price may continue to fall. Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us no clear GBPUSD trading bias.

Retail trader positioning (July 11, 2019)

GBPUSD positioning data.

Source: DailyFX/IG

Looking for longer-term forecasts for GBP and USD? Check out the DailyFX Trading Guides.

Resources to help you trade the forex markets:

Whether you are a new or an experienced trader, at DailyFX we have many resources to help you:

--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

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

DISCLOSURES

News & Analysis at your fingertips.