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British Pound Latest: GBP/USD Rally Continues, US Dollar Risks Lie Ahead

British Pound Latest: GBP/USD Rally Continues, US Dollar Risks Lie Ahead

Nick Cawley, Senior Strategist

GBP/USD Price, Chart, and Analysis

  • Cable nears a fresh two-month high.
  • US Jobs Report the standout dollar risk.
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Cable’s recovery from its multi-month lows printed in December continues with the pair pushing ever higher and back to levels last seen over two months ago. The 15 basis point interest rate hike in late December and the government’s slightly more lenient attitude towards omicron lockdown measures have given Sterling room to flex its muscles. With another UK interest rate hike likely at the next BoE meeting in early February, and with PM Boris Johnson keen to keep the UK economy open for as long as possible, the short-to-medium term outlook for Sterling remains positive.

In the short term, however, GBP/USD will be driven by US events and data. Later today the latest FOMC minutes will be released, while tomorrow the ISM non-manufacturing PMI release takes on more importance after yesterday’s manufacturing data showed prices paid dropping sharply in December. On Friday the latest, monthly look at the US jobs market with Non-Farm Payrolls expected to nearly double the lowly November figure.

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Cable’s recent rally has seen it break a longer-term series of lower highs, and unless the pair fall back below 1.3162, the series of lower lows as well. The pair are now running into a cluster of old lows between 1.3570 and 1.3610 which may temper any move higher in the short term. All eyes on US data to help push the next move in cable.

GBP/USD Daily Price Chart – January 5, 2022

Retail trader data show 52.11% of traders are net-long with the ratio of traders long to short at 1.09 to 1. The number of traders net-long is 2.84% lower than yesterday and 14.58% lower from last week, while the number of traders net-short is 11.12% higher than yesterday and 15.30% 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.

Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -3% 5% 0%
Weekly 45% -24% 6%
What does it mean for price action?
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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.