GBP/USD Struggling to Break Above 1.38

GBP/USD value, information and evaluation:

  • GBP/USD continues to seek out it troublesome to interrupt convincingly above 1.38, which isn’t simply offering “spherical quantity” resistance however can also be the place an necessary trendline checks in.
  • The most recent UK public sector web borrowing (PSNB) figures have been higher than anticipated in September however haven’t modified expectations of an imminent UK rate of interest enhance.

GBP/USD battling resistance

GBP/USD continues to seek out it troublesome to interrupt convincingly above “spherical quantity” resistance at 1.38, which can also be the place a downward-sloping trendline connecting the latest decrease highs checks in.

GBP/USD Worth Chart, Two-Hour Timeframe (September 30 – October 21, 2021)

Latest GBP/USD price chart.

Supply: IG (You may click on on it for a bigger picture)

Bullish outlook for GBP

Nonetheless, GBP remains to be effectively underpinned by market expectations that the Financial institution of England’s financial coverage committee will enhance UK rates of interest subsequent month. In line with in a single day index swaps (OIS) costs, there may be an 80% probability of a 25 foundation level price rise being agreed when the MPC subsequent meets on November 3/four and publishes its financial coverage report.

That expectation has not been modified by the newest UK public sector web borrowing information for September, excluding public sector banks, that present a smaller than anticipated deficit of £21.eight billion, higher than the £22.6 billion forecast by analysts however worse than a revised £16.eight billion in August. It was nonetheless the second-highest September determine since month-to-month information started in 1993.

The info are unlikely to vary expectations for the UK finances and spending assessment due on October 27. Chancellor of the Exchequer Rishi Sunak will doubtless announce a number of measures to attempt to steadiness the books after spending billions to raise the economic system from the downturn brought on by the Covid-19 pandemic.

Bullish sentiment sign for GBP/USD

Turning to sentiment, IG shopper positioning information are sending out a optimistic sign for GBP/USD. An evaluation of the positions of retail merchants utilizing the corporate’s platforms reveals that 44.61% of them are net-long, with the ratio of merchants brief to lengthy at 1.24 to 1. The variety of merchants net-long is 0.46% greater than yesterday however 16.42% decrease than final week, whereas the variety of merchants net-short is 7.24% greater than yesterday and 1.12% greater than final week.

Right here at DailyFX, we usually take a contrarian view to crowd sentiment, and the actual fact merchants are net-short suggests GBP/USD costs might rise. Furthermore, traders are additional net-short than yesterday and final week, and the mix of present sentiment and up to date modifications provides us a stronger GBP/USD-bullish contrarian buying and selling bias.

— Written by Martin Essex, Analyst

Be happy to contact me on Twitter @MartinSEssex

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