Jump to content

GBP/USD Price Outlook: Pound on the Back Foot vs the Dollar


Recommended Posts

GBP/USD ANALYSIS

  • CoT data shows that institutional sentiment is becoming increasingly short GBP
  • GBP/USD appearing vulnerable after UK budget speech
GBP/USD Price Forecast - British Pound Tests Major Figure

The pound has struggled against the dollar since its peak in early June 2021 and has largely been trading within a bearish channel ever since. It is often useful to consider the positioning (sentiment) of large speculators or hedge funds, otherwise known as the ‘smart money’, for a better understanding of the potential trajectory of future moves.

The latest CFTC data from the commitment of traders’ report reveals an increasing divergence of short and long trades as positioning becomes more net-short. This would suggest a view that the pound is becoming more vulnerable to the dollar.

Positioning of Large Speculators, Hedge Funds (CFTC) with GBP/USD Overlay

GBP/USD Price Outlook: Pound on the Back Foot vs the Dollar

Source: Commitment of Traders report, CFTC, prepared by Richard Snow

In addition, retail client sentiment (in aggregate) often looks for reversals during strong trends with sentiment heavily opposite to the ‘smart money’. The banner below shows live GBP/USD IG client sentiment.

image.png

KEY TECHNICAL LEVELS FOR GBP/USD

Sterling struggled to capitalize on the mid-month reversal which peaked below 1.3300 on the very same day as the UK government’s half yearly budget statement. Since that day, GBP/USD has sold off 170 points with little sign of abating. Continued selling would bring 1.3080 into focus as the nearest level of support, with the psychological level of 1.3000 coinciding with the prior low and the underside of the long-term bearish channel.

In the case that the dollar weakens, to the benefit of the pound, 1.3265 appears as resistance which would bring the pair closer to the mid-point of the channel – a line of interest as it has proven somewhat significant in containing prices or facilitating a reversal.

GBP/USD Daily Chart

GBP/USD Price Outlook: Pound on the Back Foot vs the Dollar

Source: TradingView, prepared by Richard Snow

MAIN RISK EVENTS FOR THE WEEK AHEAD

Finalized GDP growth rates for both the US and UK are confirmed this week however, the main events remain the US PCE index (the Fed’s preferred measure of inflation) and the US non-farm payroll data.

Fed officials appear the most unified since the start of the pandemic after numerous speaking engagements from both hawkish and more dovish members confirmed the need for 25 bps rate hikes going forward and remaining open to the increasing likelihood of 50bps if needed. This urgency to hike contrasts with the more cautious approach from the BoE although, the BoE is further down the road when it comes to rate hikes, having started in December of last year already. Such sentiment could see continued dollar strength vs the pound.

GBP/USD Price Outlook: Pound on the Back Foot vs the Dollar

Customize and filter live economic data via our DaliyFX economic calendar

 

 

 

--- Written by Richard Snow for DailyFX.com. 28th March 2022

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
      21,281
    • Total Posts
      90,910
    • Total Members
      41,398
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    Mapiknot
    Joined 06/02/23 21:35
  • Posts

    • Stock Market Investing S&P/ASX 200 Elliott Wave Technical  Analysis Content ASX200, CBA, IRON ORE, BHP, RIO, FMG,GOLD, NCM, GDX, PLS, LTR, DXY, AUDUSD, GOV-BONDS Summary Strong USD Turns resources lower. Banks still edging higher, creating choppy ASX200 possible top... Elliott Wave ASX 200  Wave (1) top Strategy ASX200  Very choppy environment. No Strategy. Video Chapters 00:00  S&P/ASX 200 (XJO)  / USD DXY 11:36 Commonwealth Bank CBA, XXJ 13:00 BHP Group (BHP), Rio Tinto (RIO), Fortescue Metals Group (FMG) 18:32 Newcrest Mining NCM / GOLD XAUUSD GDX 27:50 Lithium Stocks,PLS 30:52 AUDUSD / US Dollar DXY 36:46 TRIAL Buy 1 Month Get 3 Months Analyst Peter Mathers TradingLounge™ Australian Financial Services Licence - AFSL 317817 Source: tradinglounge com  
    • Look Ahead to 07/02/23: RBA; GB Retail Sales; BP, BNPP earnings Australia’s central bank is likely to deliver a fourth consecutive quarter-point interest rate hike, after further tightening by the Fed, the ECB and the BoE. Brace for UK retail, earnings from BP (BP) and BNP Paribas (BNPP). Also, look out for US trade balance figures and Halifax house price data ahead of key UK growth data out later in the week.    Angeline Ong | Presenter, Analyst and Content Editor, London | Publication date: Monday 06 February 2023        
    • Hi, I am practicing certain strategies in demo account. I have created few screeners but when i tried to buy or short sell different stocks shortlisted based on screener conditions, i am getting different kinds of errors. Some stocks you can buy but can't short-sell and so on. I searched in the forums and i understand different restrictions such as market cap should be so and so. Are these rules defined somewhere?  for e.g. one forum reply says market cap should be above 10 billion otherwise you will get second message in below list. However even i try to short sell a stock that has £30 billion market cap, i get the same error.  1. IG is not accepting opening trades on this market, you may only place an order to close. 2. Market you have requested is not longer available online Any suggestions on the above will be greatly appreciated. Thank you.
×
×
  • Create New...