GBP, British Pound, Sterling Outlook:
- GBP/USD Encapsulated by Rising Wedge
- GBP/JPY Eyes February 2020 Levels
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.
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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
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.
| Change in | Longs | Shorts | OI |
| Daily | -3% | -5% | -4% |
| Weekly | -2% | -13% | -8% |
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
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.
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
