British Pound Latest – GBP/USD Battered by US Dollar Strength
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GBP/USD - Prices, Charts, and Analysis
- US dollar makes a new twenty-year high.
- GBP/USD is unsteady and looking to move lower.
- Retail traders are heavily long GBP/USD.
After a quiet start to the European session, the US dollar suddenly took off for no apparent reason, pushing a range of US dollar pairs towards multi-month and multi-year levels. The US dollar basket (DXY) made a fresh twenty-year high, while EUR/USD recorded a new twenty-year low just above 103.00. A combination of US dollar strength and Euro weakness is driving the USD basket ever higher.
US Dollar Basket (DXY) Monthly Price Chart – July 5, 2022
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The latest Bank of England Financial Stability Report makes for gloomy reading with the central bank warning that global financial conditions have worsened and that the outlook for the UK economy is ‘very uncertain’. The central bank highlights that higher prices, weaker growth and tighter financing conditions will mean that households and businesses will become ‘more stretched over the coming months’.
Cable is currently changing hands around the 1.2030 level and is eyeing a sub-1.2000 trade. The British Pound in itself isn’t particularly weak despite ongoing UK political problems, but the US dollar is taking no prisoners today and is breaking multi-month and multi-year records against a range of other currencies. Looking at GBP/USD, the next two levels of support come in at 1.1976 and 1.1934. If these are broken convincingly, a re-test of the October 2016 low at 1.1800 comes into view.
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GBP/USD Daily Price Chart – July 5, 2022
Retail trader data show 75.43% of traders are net-long with the ratio of traders long to short at 3.07 to 1. The number of traders net-long is 3.59% higher than yesterday and 12.51% higher from last week, while the number of traders net-short is 0.30% higher than yesterday and 14.95% 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 the British Pound – 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.