British Pound (GBP) Fundamentals Remain Positive Despite Sterling Drifting Lower
British Pound (GBP) Price Outlook – Neutral/Positive
- Vaccination boost may have run its course.
- GBP/USD needs to respect support if it is to turn higher.
Sterling has been falling over the last six weeks against a range of currencies on little news, indicating that a lot of GBP-pairs had run too far ahead of themselves, primarily on the vaccination story. While the program slowed over the recent Easter weekend, just over 31.8 million people have had one jab, while nearly 6.1 million people have had two doses of vaccine. The UK government promised that it would offer a first dose of the vaccine to all 32 million people in the top nine priority groups by April 15, a target already broken with ease. The strong roll-out of the vaccination program, and some better-than-expected data releases, has helped Sterling perform strongly since the start of the year. The recent pullback in Sterling may now indicate that this vaccination boost has now played out and that hard data will become increasingly important.
The only economic data of note next week is the latest monthly and quarterly GDP update for February which may surprise to the upside. For all market-moving events and data releases, see the DailyFX Calendar.
Looking at GBP/USD and the daily chart shows how the pair tested support earlier in the session before pushing higher, despite a strong US dollar. While the short-term downtrend of lower highs and lower lows is still in place, today’s price candle may well be making a ‘bullish hammer’ which would suggest higher prices ahead.
GBP/USD Daily Price Chart (October 2020 – April 9, 2021)
Retail trader data show 61.59% of traders are net-long with the ratio of traders long to short at 1.60 to 1.The number of traders net-long is 2.64% higher than yesterday and 44.21% higher from last week, while the number of traders net-short is 0.80% higher than yesterday and 15.73% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall.Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bearish contrarian trading bias.
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What is your view on GBP/USD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.