British Pound Forecast: US Dollar Weakness Supports GBP/USD Recovery
GBP/USD - Prices, Charts, and Analysis
- US dollar weakness gives GBP/USD a reprieve.
- Calls for a vote of no confidence in PM Johnson grow louder.
The US dollar is trading sideways today, not helped by the Memorial Day holiday in the US, leaving GBP/USD listless in early turnover. With US markets closed, and with no UK economic data on the slate, today’s session will likely see little volatility or price action. The UK is also nearing a four-day weekend with the Queen’s Platinum Celebrations commencing this Thursday, leaving the pair vulnerable to US dollar drivers at the end of the week, especially Friday’s US non-farm payroll report.
For all market-moving economic data and events, refer to the DailyFX calendar
Trade Smarter - Sign up for the DailyFX Newsletter
Receive timely and compelling market commentary from the DailyFX team
The latest US Commodity and Futures Report, CoT, shows that traders and speculators have trimmed their US dollar long positions by around USD2 billion in the week ending May 24. The US dollar basket (DXY) printed a fresh one-month low earlier in today’s session and opened below its 50-day simple moving average for the first time in over three months.
US Dollar Basket (DXY) Daily Price Chart - May 30, 2022
UK Prime Minister Boris Johnson remains under pressure after last week’s party gate report. The calls for a vote of no confidence in the PM continue to grow louder with a reported 34 Tory MPs now openly questioning Boris Johnson’s position. If the total number of letters of no confidence in the PM sent to the 1922 committee reaches 54, then a vote on the Prime Ministers’ future will be held. A vote of no confidence in the PM will add a dose of volatility to Sterling and temper any further short-term strength.
Cable’s pullback from the May 13 low (1.2156) has been impressive and has quashed market talk that the pair may test 1.2000. The two daily red candles made in the last two weeks have been negated quickly and the pair may soon test the 50-day simple moving average that currently sits at 1.2685.
GBP/USD Daily Price Chart - May 30, 2022
Retail trader data show 67.44% of traders are net-long with the ratio of traders long to short at 2.07 to 1. The number of traders net-long is 1.13% higher than yesterday and 7.83% lower from last week, while the number of traders net-short is 4.04% higher than yesterday and 19.77% 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.
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.