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GBP Price Forecast: GBP/USD May Struggle to Push Noticeably Higher

GBP Price Forecast: GBP/USD May Struggle to Push Noticeably Higher

Nick Cawley, Senior Strategist

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GBP/USD - Prices, Charts, and Analysis

  • S&P PMIs highlight growing customer confidence.
  • UK economic docket looks very thin next week.
  • The US dollar may have peaked.

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Most Read: GBP Price Forecast: Pound Undeterred by Brexit Deal

GBP/USD continues to trade on either side of 1.2000 in fairly uninspiring trade with the US dollar the driver behind any short-term moves. The US dollar has been moving around this week as Fed speakers continue their hawkish narrative, aided by this week’s punchy core PCE reading that came in hotter than expected. On the flip side, the recent CB consumer confidence data (February) missed by a sizeable margin, adding to any dovish market outlook.

The greenback has been supported by rising US Treasury yields with the rate-sensitive 2-year UST hitting 4.95% mid-week, a level last seen in July 2007. One technical indicator suggests however that US short-dated bond yields may have peaked. On Thursday the US 2-yr yield made a gravestone doji, a bearish reversal candle, an indicator that needs to be closely watched over the coming days. Saying that the recent uptrend in short-dated yields is strong and may take control again. The latest US ISM data is released this afternoon and may steer the greenback into the weekend.

US 2-Year Treasury Yield – March 3, 2023

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The final S&P UK PMI reading released earlier in the session point to renewed consumer confidence. According to Dr. John Glen, chief economist at CIPS, ‘As recessionary fears started to recede, there were expectations of improving business opportunities in the next 12 months resulting in the highest future optimism since March last year’. With the UK finely balanced between recession and expansion, the Bank of England (BoE) may rein back on future rate hikes after this month’s meeting. The BoE is expected to hike by 25 basis points on March 23. Next week there is very little UK economic data of importance and this again leaves cable looking at the US dollar as the driver of price action.

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The daily GBP/USD chart looks mixed with a slight downside bias. Cable is being supported by the 200-dma while at the same time being pressed down on by the 20- and 50-dmas. There seems to be reasonable short-dated support just above 1.1900, an area that has been repeatedly tested in the last month. A break below would leave the January 6 low at 1.1842 vulnerable.

GBP/USD Daily Price Chart – March 3, 2023

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All Charts via TradingView

GBP/USD Mixed
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 3% -5% -1%
Weekly 10% 13% 11%
What does it mean for price action?
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Retail Traders Build Their Longs

Retail trader data show 65.11% of traders are net-long with the ratio of traders long to short at 1.87 to 1.The number of traders net-long is 19.91% higher than yesterday and 20.39% higher from last week, while the number of traders net-short is 10.67% lower than yesterday and 10.10% 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.

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