The daily GBP/USD chart is bullish. Cable is in a good mood heading into the weekend, having recently recorded a one-month high at 1.2245. While sterling has gained a slight bid in the past two weeks, the increase, this week has been driven by a lower US Dollar.
The greenback, which has been a one-way trade since June of last year, is losing its luster after Fed Chair Powell said that the Fed might stop rate rises when appropriate, the first time this viewpoint has been expressed. Over the previous two days, the US dollar has dropped considerably across the board.
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The Bank of England (BoE) will raise interest rates again next week, with the market currently expecting a 50 basis point increase. The BoE, like many other central banks, is attempting to keep up with inflation, which is forecast to reach double digits in the UK in Q3. According to the Office for National Statistics figures, the UK unemployment rate dropped to a 50-year low of 3.7 percent between January and March, printing at +0.5 percent in May compared to -0.2 percent in April (ONS). This robust background should give the Bank of England flexibility to raise interest rates by half a percentage point next Thursday, further supporting the Sterling.
The daily GBP/USD chart continues to be bullish, with higher lows recorded since mid-July. A string of higher highs has been broken a few times, but the market remains positive. The pair has also broken above the 20- and 50-day simple moving averages for the first time since mid-February, adding to the bullish picture. If the GBP/USD remains above 1.2150, additional gains are possible. Traders should watch for end-of-month fix flows today, which might create significant, short-term swings.
According to retail trader statistics, 65.24 percent of traders are net-long, with the long-to-short ratio at 1.88 to 1. The number of traders net-long is 3.12 percent higher than yesterday and 11.30 percent lower than last week, while the number of traders net-short is 2.41 percent higher than yesterday and 21.96 percent higher than last week.
We usually adopt a contrarian approach to crowd mood, and the fact that traders are net-long signals that GBP/USD prices may continue to decrease. Positioning is more net-long than yesterday but less net-long than last week. The combination of current attitude and previous adjustments results in a mixed GBP/USD trading tendency.