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British Pound (GBP) Outlook: GBP/USD and EUR/GBP Weekly Forecasts

British Pound (GBP) Outlook: GBP/USD and EUR/GBP Weekly Forecasts

Nick Cawley, Strategist

British Pound (GBP) Price Outlook – GBP/USD and EUR/GBP

  • GBP/USD continues to forge ahead after 1.4000 taken out.
  • EUR/GBP sell-off continues and looks to have legs

At the risk of sounding like a broken record, GBP/USD continues to edge higher with 14 of the last 16 weekly candles positive. The pair are now at their highest level since mid-April 2018 with little in the way of resistance before that month’s high print of 1.4377. The weekly chart also shows the 50-sdma (blue) nearing the 200-sdma (black) with a potential ‘golden-cross’ being formed in the next few weeks. While this may be late to the party, it could signify that the 1.4377 level is not the peak of this rally and a complete retrace of the Brexit move – high print at 1.5019 – may be on the cards. While small retraces may occur, this is not a move to get in the way of, instead, better to go with the flow.

Technical vs Fundamental Analysis in Foreign Exchange

GBP/USD Weekly Price Chart (June 2016 – February 19, 2021)

GBP/USD Weekly Chart

Retail trader data show 31.80% of traders are net-long with the ratio of traders short to long at 2.14 to 1. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/USD prices may continue to rise.Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bullish contrarian trading bias.

A sorry looking chart for EUR/GBP bulls with this week’s sell-off in particular breaking below some important levels. The first to go was the 61.8% Fibonacci retracement at 0.8747 before a cluster of old lows around 0.8670 to 0.8680. With these levels seemingly in the rear mirror, a full retrace back to the February 19, 2020 low print at 0.8282 is the likely longer-term objective. The chart does look oversold, using the CCI reading, and the Euro is also picking up a small bid so the next week may see a limited move. As long as the pair stays below the 0.8750 level, then the move lower will remain intact.

EUR/GBP Daily Price Chart (February 2020 - February 19, 2021)

EUR/GBP Daily Chart

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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.