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CFDs are complex instruments. 72% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.

GBP/USD technical analysis – positive trend remains intact

The British pound remains underpinned with the recent weakness in the GBP/USD likely to be short-term.

Dollar Source: Bloomberg

GBP/USD technical outlook

  • Sterling – short-term weakness, longer-term strength.
  • Retail traders are effectively flat of GBP/USD and the outlook is mixed.

GBP/USD is currently trapped between $1.366 and $1.40 with conflicting trends keeping the pair trapped. The longer-term uptrend remains in place, and dominant, while the short-term sell-off, from the 24 February high, is keeping downward pressure on GBP/USD. Sterling is, however, underpinned by a strong vaccination program that has seen around 47% of the UK population having already had at least one vaccine jab. This program – and the hope that the UK economy can rebound quicker than expected - has helped to push sterling’s trade weighted index (TWI) back to highs not seen since 2016.

Sterling trade weighted index – 6 April 2021

Sterling trade weighted index – 6 April 2021 Source: Bank of England
Sterling trade weighted index – 6 April 2021 Source: Bank of England

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GBP/USD stuck between two trends

The daily chart highlights the two different trends running GBP/USD at present. A series of short-term lower highs from late February are countered by an even shorter-term series of higher lows off the late March double low around $1.367 and this pattern will need to break before a new move can be called with confidence. The 20-day simple moving average (SMA), red line, is now in-play again and acting as support, although it is currently under pressure, while the 50-day SMA (blue line) will also need to be reclaimed if GBP/USD is to run higher. The $1.367-$1.40 range is expected to hold in the short term.

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GBP/USD daily price chart (June 2020 – 6 April 2021)

Retail trader data show 48.95% of traders are net-long with the ratio of traders short to long at 1.04 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. Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed GBP/USD trading bias.


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