Market update: British pound stabilises as retail traders slowly increase bearish GBP/USD exposure

[MongiIG]

The British pound has been stabilising against US dollar, while retail traders have been slowing becoming bearish and the GBP/USD keeps investors guessing.

 

Source: Bloomberg

 

GBP/USD Forex Pound sterling Market sentiment United States dollar Head and shoulders (chart pattern)

Daniel Dubrovsky | Currency Analyst, DailyFX, San Francisco | Publication date: Thursday 14 September 2023 04:56

GBP/USD sentiment outlook: bullish

The British pound has been marking time in recent weeks, pausing a slow and steady decline against the US dollar since July. That said, retail traders are reducing downside exposure of late. This can be seen by looking at IG Client Sentiment (IGCS), which often functions as a contrarian indicator. With that in mind, will Sterling reverse higher?

The IGCS gauge shows that about 62% of retail traders are net-long GBP/USD. Since most of them are biased to the upside, this still hints that prices may continue falling down the road.

But, downside exposure has increased by 5.22% and 9.71% compared to yesterday and last week, respectively. With that in mind, recent changes in exposure are hinting that prices may soon reverse higher.

IG Client Sentiment chart

 

Source: DailyFX

British pound technical analysis

On the daily chart, GBP/USD remains technically biased lower in the aftermath of confirming a breakout under a bearish Head-and-Shoulders chart formation. But, since then, prices have been stabilising around the 200-day moving average (MA). The latter is thus maintaining the dominant upside focus.

A turn higher from here would place the focus on the neckline of the chart formation around 1.2592. Confirming a breakout above this point would undermine the Head-and-Shoulders, exposing the left shoulder around 1.2848.
Otherwise, breaking under the 200-day MA exposes the May low of 1.2308 as subsequent support.

GPD/USD daily chart

 

Source: TradingView

 

 

 

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.