British Pound, GBP/USD, GBP/JPY, EUR/GBP – Talking Points:
- GBP/USD poised to push higher after breaching key resistance.
- GBP/JPY rebound struggling to break above the August low.
- EUR/GBP coiling up above key support. Is a topside push in the offing?
The politically-sensitive British Pound may continue to push higher against the haven-associated US Dollar, after breaking above pivotal chart resistance. However, GBP is at risk of losing ground to the Japanese Yen and Euro in the short-term.
GBP/USD Daily Chart – Break of Resistance Hints at Further Upside
GBP/USD daily chart created using TradingView
GBP/USD rates appear to be gearing up for a push back above the March High (1.3200), after price surged 1.5% yesterday to slice easily through key resistance at the October 12 swing-high (1.3083).
The development of the RSI and MACD indicator hints at building buying pressure, as both oscillators strengthen into bullish territory.
With that in mind, a break above the March high (1.3200) looks likely in the coming days if price remains constructively perched above psychological support at the 1.3100 mark, with a daily close above the August 19 high (1.3267) needed to bring the yearly high (1.3483) into focus.
Conversely, a breach of support at the October 12 high (1.3083) would probably ignite a pullback to confluent support at the Ascending Channel uptrend and August low (1.2981), with a break below carving a path for price to test the June high (1.2813).
Retail trader data shows 29.86% of traders are net-long with the ratio of traders short to long at 2.35 to 1. The number of traders net-long is 24.98% lower than yesterday and 8.93% lower from last week, while the number of traders net-short is 34.73% higher than yesterday and 17.92% higher from last week.
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.
GBP/JPY Daily Chart – August Low Capping Gains
GBP/JPY daily chart created using TradingView
The GBP/JPY exchange rate could be at risk of reversing lower in the near-term, as price struggles to hurdle resistance at the August low (137.75).
In fact, GBP/JPY could be carving out a complex Head and Shoulders topping pattern, with price failing to break back above psychological resistance at the 138.00 mark probably resulting in the formation of the right shoulder.
Therefore, a sharp reversal lower could be in the offing if the 138.00 level holds firm, with a break back below the sentiment-defining 200-day moving average (136.70) needed to validate bearish potential and open the door for a retest of the monthly low (135.05).
On the other hand, a push to test the June 5 daily close (138.74) may eventuate if resistance at the August low (137.75) gives way, with a break and close above the June high (139.75) needed to invalidate the bearish reversal pattern.
Retail trader data shows 46.03% of traders are net-long with the ratio of traders short to long at 1.17 to 1. The number of traders net-long is 3.26% lower than yesterday and 9.43% higher from last week, while the number of traders net-short is 11.08% lower than yesterday and 13.30% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/JPY prices may continue to rise.
Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBP/JPY price trend may soon reverse lower despite the fact traders remain net-short.
EUR/GBP Daily Chart – Breaking Down or Coiling Up?
EUR/GBP daily chart created using TradingView
Finally, despite retreating over 3% from the September 11 high (0.9292), the EUR/GBP exchange rate’s outlook remains skewed to the topside as price holds above key support at the 100-DMA (0.9021) and monthly low (0.9007).
A daily close back above the 21-MA (0.9074) and 50-MA (0.9066) is needed to validate bullish potential and would potentially generate a push back towards the September high (0.9292), if buyers can overcome resistance at the June high (0.9176).
On the contrary, a break to fresh monthly lows would probably precipitate a more extensive pullback towards confluent support at the 78.6% Fibonacci (0.8957) and the uptrend extending from the March low (0.8594).
Retail trader data shows 54.91% of traders are net-long with the ratio of traders long to short at 1.22 to 1. The number of traders net-long is 21.76% higher than yesterday and 8.20% lower from last week, while the number of traders net-short is 32.99% lower than yesterday and 1.78% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/GBP prices may continue to fall.
Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed EUR/GBP trading bias.
-- Written by Daniel Moss, Analyst for DailyFX
Follow me on Twitter @DanielGMoss
