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GBP/USD Outlook - Sterling Propped Up by Data But US Dollar Strength Controls Cable

GBP/USD Outlook - Sterling Propped Up by Data But US Dollar Strength Controls Cable

Nick Cawley, Strategist

GBP/USD Price, Chart, and Analysis

Keep up to date with all market-moving data releases and events by using the DailyFX Calendar

The latest UK retail sales data for October beat market expectations, boosted primarily by higher sales in non-food stores, according to the Office for National Statistics (ONS). Non-food stores sales rose by 4.2%, while automotive fuel sales volumes fell by 6.4% following strong growth in September.

GBP/USD Outlook - Sterling Propped Up by Data But US Dollar Strength Controls Cable

In a recent interview with the BBC, Irish Prime Minister Micheal Martin said the ‘mood music’ in EU-UK talks over the Northern Ireland Protocol had changed and urged both sides to ‘knuckle down and get it resolved’. The EU recently offered a comprehensive package of measures to ease checks on goods arriving into Northern Ireland from the UK with talks expected to continue in the hope of bringing both sides closer together. While the recent shift is seen as a positive after weeks of bitter talks, the UK’s lead negotiator Lord Frost remains adamant that triggering Article 16 is still a live option if talks break down.

Article 16: Why Triggering it Risks an All Out UK-EU Trade War

The US dollar picked up a healthy bid at the start of European trade, weighing on GBP/USD after the pair’s positive start post-retail sales data. Cable touched 1.3500 earlier before US dollar strength pushed the pair back down to 1.3425, erasing most of Wednesday’s gains. The ongoing pattern of lower highs and lower lows on the daily chart suggests that the pair may eventually re-test the recent 1.3353 low print if USD strength continues.

GBP/USD Daily Price Chart November 19, 2021

GBP/USD Outlook - Sterling Propped Up by Data But US Dollar Strength Controls Cable

Retail trader data show 69.44% of traders are net-long with the ratio of traders long to short at 2.27 to 1. The number of traders net-long is 1.17% lower than yesterday and 17.84% lower from last week, while the number of traders net-short is 0.62% lower than yesterday and 23.03% higher 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. 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 soon reverse higher despite the fact traders remain net-long.

While Sterling moves lower against the US dollar, it continues to move higher against the Euro. The single currency continues to weaken with any EU interest rate hike pushed back until at least 2023, while the sharp uptick in covid cases across Europe is seeing new lockdowns introduced. Austria has announced a full national lockdown from November 22, while Germany recently placed tighter restrictions on unvaccinated people and refused to rule out a new national lockdown if cases continue to soar.

EURGBP is currently changing hands just above the 0.8400 level and looks set to eventually re-test Wednesday’s 21-month low at 0.83835. The CCI indicator shows the pair as oversold, while all three simple moving averages remain in a negative set-up.

EUR/GBP Daily Price Chart November 19, 2021

GBP/USD Outlook - Sterling Propped Up by Data But US Dollar Strength Controls Cable

What is your view on GBP/USD and EUR/GBP – 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.

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