GBP/USD and EUR/GBP Will Dance to Different Music

GBP/USD and EUR/GBP – rates, charts, and analysis

• The European Central Bank and Federal Reserve are expected to raise interest rates next week.
• A bit of high-impact data out of the UK next week will keep the pound weak.

Sterling ended the week on a positive note with the pound back above 1.2500 and with a test of EUR/GBP support at 0.8800. However, both pairs will come under pressure next week when the Federal Reserve (Fed) and European Central Bank (ECB) announce their latest monetary policy decisions on Wednesday and Thursday respectively. Both were seen driving rates higher, but it is the important post-release press conferences that are likely to drive price action in both the US Dollar and the Euro. With little to no data to help guide the British pound, GBP/USD, and EUR/GBP, they will be vulnerable to outside forces next week.

GBP/USD is surging higher heading into the end of the week as the pair hit a two-week high. Resistance at 1:2547 is nearby and could get pressured and a break above this level would see the pound return to levels last seen in June 2022. The technical setup looks positive for a further move higher with GBP/USD supported by the 20-day SMA . The Average True Range indicator – the red line at the bottom of the chart – shows the lack of volatility in the pair over the past few weeks.

Daily price chart for GBP/USD – Apr 28, 2023

Chart via TradingView

The GBP/USD indicator is bullish

Retail trader data shows that 38.09% of traders hold net long positions with the short-to-long ratio at 1.63 to 1, the number of long-term traders is 4.31% lower than yesterday and 19.38% lower than last week, while the Number of Dealers Net short positions of traders are 0.53% higher than yesterday and 7.20% higher than last week.

We usually take a view contrarian to crowd sentiment, and the fact that traders are short on the bargain suggests that GBP/USD prices could continue to rise. Traders are getting tougher than yesterday and last week, giving us the mix of current sentiment and recent changes Stronger bullish contrarian trading bias for GBPUSD.

The EUR/GBP is also showing signs of mild strength in the pound as the pair started to move lower and broke a series of higher lows and higher highs. The resistance just above 0.8866 continues to hold, making the pair vulnerable to return to the previous support at 0.8712.

EUR/GBP daily price chart – April 28, 2023

Chart via TradingView

Retail trader data shows that 42.62% of traders are net long with the ratio of traders short to long at 1.35 to 1. Recent changes in sentiment warn that the current EUR/GBP price trend might reverse bearish soon despite the fact that traders are still net short.

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