GBP/USD price outlook: pound-dollar to probe 2018 swing high
Pound sterling bulls propel GBP/USD price action within reach of its 2018 swing high, but can the cable maintain upward momentum?
Pound sterling strenght propelling GBP/USD to 35-month high
- GBP/USD pierces the $1.40-price level for the first time since early 2018
- Pound sterling gaining ground as UK lockdowns are lifted post-Brexit deal
- Broader US dollar weakness could exacerbate GBP/USD buying pressures
GBP/USD price action has been ripping higher over the last two and a half weeks. Since its early-February low, the pound-dollar has surged 500 pips and now trades at its highest level in nearly three years. Improving outlook for the UK economy, largely stemming from easing Covid-19 restrictions and reduced uncertainty given the recent Brexit trade deal, stands out as a primary driver fueling pound sterling strength. GBP/USD has likely benefited from broad US dollar selling as well.
GBP/USD price chart: weekly time frame (September 2017 to February 2021)
That said, the pound sterling could continue gaining ground against its US dollar peer and extend its rally deeper into 2018 highs. Though the relative strength index on a weekly chart suggests GBP/USD price action hovers in ‘overbought’ territory, bullish momentum has re-accelerated as highlighted by the moving average convergence/divergence (MACD) indicator, and Bollinger band width expansion also helps facilitate upside potential. GBP/USD bulls might look to the 8-week and 20-week simple moving averages (SMAs) as possible technical support zones if a consolidation lower materialises.
GBP/USD price chart - IG client sentiment: weekly time frame (23 February 2021)
While there currently is a mixed trading signal for GBP/USD according to the latest IG client sentiment (IGCS) data, the vast majority of retail traders remain net-short. Not to mention, there was an -11% weekly decrease in long positioning. Seeing that we typically look at IGCS through the lens of a contrarian, this suggests that the bullish GBP/USD price trend may continue.
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