GBP/USD Strength Likely to Resume

GBP price, news and analysis:

• Tuesday’s US inflation data will likely dominate trading near-term but once the figures have been absorbed GBP/USD is well placed to advance.
• The UK reopened Monday, a key vaccination target has been reached and GDP data for February were better than analysts had expected.

GBP/USD well placed to advance

US inflation figures due at 1330 London time will likely dominate Tuesday’s FX trading but once they are out of the way GBP/USD is in a good place to gain ground. Non-essential shops, pubs, gyms and hairdressers all reopened in the UK Monday and that should boost the economy.

Moreover, the UK has hit its target of offering a Covid-19 vaccine to all over-50s a few days early and February GDP data released ahead of the opening of European trading were better than analysts polled by the news agencies had predicted.

Source: DailyFX calendar

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Note that the US Dollar has traded broadly sideways for the past week but GBP/USD, which hit a recent high of 1.4242 on February 24 before easing back, has stabilized this week and is showing signs of rallying.

GBP/USD Price Chart, One-Hour Timeframe (April 1-13, 2021)

Source: IG (You can click on it for a larger image)

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Caution is called for, however, as IG client sentiment data are currently sending a bearish signal due to a sharp rise in long positions. The retail trader data shows 64.43% of traders are net-long, with the ratio of traders long to short at 1.81 to 1. The number of traders net-long is 8.74% higher than Monday and 47.57% higher than last week, while the number of traders net-short is 3.25% higher than Monday but 23.35% lower than last week.

At DailyFX, we typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may fall. Moreover, traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives a stronger GBP/USD-bearish contrarian trading bias.

— Written by Martin Essex, Analyst

Feel free to contact me on Twitter @MartinSEssex