GBP/USD TECHNICAL ANALYSIS – TALKING POINTS:
- British Pound upswing puts support-turned-resistance under fire
- Overall chart positioning continues to favor a bearish trend bias
- Retail client sentiment studies warn GBP might extend recovery
The British Pound has retraced some of its recent losses against the US Dollar, moving to re-test support-turned-resistance set from early November that was overcome last week. This barrier is reinforced by a downward-sloping trend line capping forays to the upside since the start of the year.
A daily close above the latter barrier would neutralize near-term selling pressure, setting the stage for another challenge of structural resistance guiding GBP/USD lower for over 12 years. Alternatively, turning back below the February 10 low at 1.2872 exposes the 1.2763-84 inflection area.
On balance, the upswing as it presents itself thus far appears to be corrective in the context of a longer-term decline. The year opened with a break of 3-month support in the wake of rejection at structural resistance. That may well be setting the stage for lasting bearish follow-through.
GBP/USD TRADER SENTIMENT
Retail trader data shows 58.21% of traders are net-long with the ratio of traders long to short at 1.39 to 1. The number of traders net-long is 19.23% lower than yesterday and 25.15% lower from last week, while the number of traders net-short is 14.11% higher than yesterday and 36.33% higher from last week.
IG Client Sentiment (IGCS) is typically used as a contrarian indicator, traders being net-long suggests GBP/USD may continue to fall.Yet traders are less net-long than yesterday and compared with last week. This warns that prices may reverse higher.
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— Written by Ilya Spivak, Currency Strategist for DailyFX.com
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