Keys to look out for next week as the British Pound changes: A Performance between the GBP/USD and EUR/GBP
The British Pound Ends the Week on a High Note
What Happened?
The British Pound is doing well this week, with the GBP/USD pair above 1.2500 and the EUR/GBP pair testing support at 0.8800. However, next week, both pairs may come under pressure when the Federal Reserve (Fed) and the European Central Bank (ECB) announce their latest monetary policy decisions on Wednesday and Thursday, respectively. Both banks are expected to raise interest rates, but it is the post-release press conferences that will likely drive price action in both the US dollar and the Euro. With little data to help steer the British Pound, GBP/USD and EUR/GBP will be vulnerable to external forces next week.
GBP/USD
The GBP/USD pair is doing well, with a fresh two-week high. Resistance at 1.2547 is close and may come under pressure. A break above this level would see cable back at levels last seen in June 2022. The technical setup looks positive for a further move higher, with GBP/USD supported by the 20-day simple moving average. The Average True Range indicator shows the lack of volatility in the pair over the past few weeks.
Retail Sentiment
Retail trader data shows that 38.09% of traders are net-long with the ratio of traders short to long at 1.63 to 1. The number of traders net-long is 4.31% lower than yesterday and 19.38% lower from last week, while the number of traders net-short is 0.53% higher than yesterday and 7.20% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/USD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bullish contrarian trading bias.
EUR/GBP
The EUR/GBP pair is showing signs of a mildly stronger Sterling, with the pair starting to move lower and breaking a series of higher lows and higher highs. Resistance just above 0.8866 continues to hold, leaving the pair vulnerable to a move back to prior support at 0.8712.
Retail Sentiment
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 may soon reverse lower despite the fact traders remain net short.
What’s Next?
It’s hard to say whether the GBP/USD and EUR/GBP pairs will continue to rise or fall. It’s important to keep an eye on the Federal Reserve and the European Central Bank’s announcements next week, as they will likely have an impact on the pairs.