British Pound (GBP) Price Outlook: GBP/USD Facing Trendline Resistance
GBP price, news and analysis:
- GBP/USD has been lifted by signs that coronavirus cases in the UK are dropping and by suggestions that office attendance is rising.
- However, the pair is close to resistance from a downward-sloping trendline that has been in place on the charts for more than six weeks and that could hinder further progress higher, at least for a while.
GBP/USD facing resistance
The UK recorded its lowest daily total of new coronavirus cases since July 4 Monday – the sixth daily drop in succession – and that is arguably positive for the UK economy and GBP/USD, particularly as signs emerge that office attendance is rising.
However, as the four-hour chart below shows, the pair is approaching resistance from a downward-sloping trendline in place since the start of June and that will likely curb the rally in place for the past seven days, at least for a while. The trendline currently checks in around 1.3850 and that level will have to be broken on a sustained basis if GBP/USD is to make further progress upwards.
GBP/USD Price Chart, Four-Hour Timeframe (May 26 – July 27, 2021)
Source: IG (You can click on it for a larger image)
Note, though, that retail traders are moving into short positions and that, from a contrarian viewpoint, is bullish for GBP/USD. IG client sentiment figures show that 53.12% of retail traders are currently net-long, with the ratio of traders long to short at 1.13 to 1. The number of traders net-long is 6.61% lower than yesterday and 30.15% lower than last week, while the number of traders net-short is 14.24% higher than yesterday and 72.99% higher than last week.
At DailyFX, we typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall.Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current GBP/USD price trend may continue higher despite the fact traders remain net-long.
--- Written by Martin Essex, Analyst
Feel free to contact me on Twitter @MartinSEssex
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.