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Sterling (GBP) Price Outlook: GBP/USD Shackled by the US Dollar, EUR/GBP Hitting Fresh Lows

British Pound (GBP) Price, Analysis and Charts:

Sterling continues to benefit from the ongoing success of the UK government’s vaccination program which brings forward the hope the UK economy will be opened sooner rather than later. The program has administered in excess of 10.5 million first shots already with the vaccination rate increasing each week. The British Pound also got a boost on Thursday when the Bank of England seemed to push back any thoughts of negative interest rates, sending UK gilt yields, and GBP, higher.

Technical vs Fundamental Analysis in Foreign Exchange

While cable ends the week around 1.3700, due to a weaker-than-expected US jobs report – the pair should close higher on the week and within roughly 60 pips of another multi-month high. The bullish channel from March/April last year continues to be in play, although the width of the channel makes this relatively easy, while the 20- (red) and 50-day (blue) simple moving averages are providing a degree of support, with the latter stopping Thursday’s sell-off in its track. While the fundamental backdrop remains the same, GBP/USD should continue to grind higher.

GBP/USD Daily Price Chart (March 2020 – February 5, 2021)

GBP/USD Daily Chart

Change in Longs Shorts OI
Daily-24%8%-6%
Weekly10%18%15%

Retail trader data show 44.07% of traders are net-long with the ratio of traders short to long at 1.27 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 more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed GBP/USD trading bias.

EUR/GBP continues to press lower with the single currency under pressure from a mixed reception to the block’s coronavirus vaccination program. The pair has been moving lower since late-December and there seems no reason to get in the way of this move. EUR/GBP is currently on either side of 61.8% Fibonacci retracement at 0.8747, while any upside move will run into resistance from the descending 20-day simple moving average, currently around 0.8850. To the downside, 0.8668 to 0.8678 looks achievable, although the pair are in oversold territory so this may need to wash out before further moves lower.

Moving Averages (MA) Explained for Traders

EUR/GBP Daily Price Chart (February 2020 – February 5, 2021)

EUR/GBP Daily Chart

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What is your view on Sterling – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.