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British Pound Latest: GBP/USD Slides on Freedom Day Fears, US Dollar Strength

British Pound Latest: GBP/USD Slides on Freedom Day Fears, US Dollar Strength

Nick Cawley, Senior Strategist

British Pound (GBP) Price Outlook

  • Freedom Day fears as covid cases continue to surge.
  • US dollar picks up a risk-off bid.
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The British Pound is under pressure across the board as the market’s fear that today’s unwind of lockdown measures will add further to the sharp rise in covid cases across the country. New covid cases have been rising sharply over the last few weeks, mainly due to the spread of the delta variant, and there are increasing fears that the UK may have to re-introduce some lockdown measures if this surge continues. While the fatality rate remains low, if hospitalization numbers continue to grow, the UK government will have to consider reigning back some of the country’s new found freedom.

The US dollar is picking up a further bid as markets turn sharply risk-off in early trade. The chart below shows that the Dollar basket remains within a well-defined channel and today’s move has also seen last week’s highs around 92.84 taken out. The next target is 93.46, the March 31 multi-month high.

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US Dollar (DXY) Daily Chart (July 19, 2021)

GBP/USD is struggling to keep hold of the 1.3700 handle and is back at levels last seen in April. The pair are now heading towards important support around 1.3670 and this needs to hold otherwise GBP/USD may retrace back to the 1.3540 level or lower. The chart is showing an oversold signal – CCI – and this may stem any move lower in the short term.

GBP/USD Daily Price Chart (july 19, 2021)

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IG client sentiment data show that traders have been increasing their net-long GBP/USD positions over the week. The latest data show 69.81% of traders are net-long with the ratio of traders long to short at 2.31 to 1.The number of traders net-long is 7.77% higher than yesterday and 41.07% higher from last week, while the number of traders net-short is 6.00% higher than yesterday and 29.89% 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.

What is your view on Sterling– 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.