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British Pound Price Action Setups: GBP/USD, GBP/JPY

British Pound Price Action Setups: GBP/USD, GBP/JPY

Tammy Da Costa, Analyst

GBP, British Pound, Sterling Outlook:

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The British Pound has managed to maintain its upward trajectory in spite of an extension of current lockdown measures until 22nd February 2021 . Despite a relatively subdued week of volatility in the FX-space, GBP marched on against its major counterparts, as the rapid rate of vaccinations resulted in a surge in business confidence amid hopes of a reopening of the economy as the inoculation program progresses.

Visit the DailyFX Educational Center to discover why news events are Key to Forex Fundamental Analysis

Meanwhile, all eyes are now on the upcoming BoE monetary policy decision and the release of its quarterly MPC report scheduled for Thursday 4 February 2021. Although policy measures are expected to remain unchanged, the quarterly report will provide a better perspective relating to the current health of the UK economy, as renewed lockdown measures and a rising fatality rate resulted in a decrease in economic output, therefore limiting GBP strength.

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GBP/USD Price Action

GBP/USDprice action remains within the confines of a rising wedge, simultaneously clinging to the 55-period Exponential Moving Average (EMA), providing both support and resistance for the major currency pair. Currently, the key psychological level of 1.3800 holds bulls at bay, with a possible tilt towards mean reversion, provided that bears manage to break below trendline support at 1.364.

GBP/USD 4 Hour Chart

GBPUSD Four Hour Price Chart

Chart prepared by Tammy Da Costa, IG

At the time of writing, retail trader data shows 33.15% of traders are net-long with the ratio of traders short to long at 2.02 to 1. The number of traders net-long is 26.17% lower than yesterday and 26.12% lower from last week, while the number of traders net-short is 23.02% higher than yesterday and 11.35% higher from last week.

GBPUSD Sentiment

Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bullish contrarian trading bias.

GBP/JPY Price Action

Bulls driving GBP/JPY continue to dominate with numerous technical indicators implying that a retest of the February 2020 high (144.829) is still possible in the near future. Price action remains above both the 50-Day Moving Average (SMA) and the rising trendline which continues to hold as support. However, a Relative Strength Index (RSI)of 71 indicates that the pair may be overbought andfurther advances may face a bit of resistance.

GBP/JPY Daily Chart

GBPJPY Price Chart

Chart prepared by Tammy Da Costa, IG

According to client sentiment, at the time of writing, retail trader data shows 28.75% of traders are net-long with the ratio of traders short to long at 2.48 to 1. The number of traders net-long is 0.90% higher than yesterday and 1.75% lower from last week, while the number of traders net-short is 18.59% higher than yesterday and 37.04% higher from last week.

GBPJPY Sentiment

Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/JPY-bullish contrarian trading bias.

--- Written by Tammy Da Costa, Market Writer for DailyFX.com

Contact and follow Tammy on Twitter: @Tams707

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

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