GBP Q2 2021 Technical Forecast

Technical Evaluation: Cautious Optimism on GBP

GBP/USD Grinding Increased, Stretched Positioning Presents a Danger

As Q1 involves a detailed, a lot of the early quarter features in GBP/USD have been largely retraced after peaking at 1.4235. In the meantime, the shut under the 50DMA confirms that the pair has topped out within the short-term, during which losses may prolong in direction of the 100DMA and a multi-month rising trendline under. Moreover, speculative net-long positioning in GBP/USD is nearing stretched ranges and thus reinforces the danger {that a} washout in positioning may take the pair in direction of 1.35.

Nonetheless, a transfer to the 200DMA can be a stretch too far in our view, notably because the prior short-term high (Aug 2020) noticed a 5% pullback, whereas the present pullback is at circa 4%. That mentioned, heading into Q2 we stay cognisant that GBP/USD is approaching a seasonally-strong month (April), during which the pair has risen 9 out of the final 10 years with a median acquire of 1.6%. An element we can not low cost and will fairly simply put 1.40 again in focus. But, whereas we’re coming into the Pound’s greatest month, its weakest common month is straight on its heels in Could. All in all, we stay cautiously optimistic that the Pound can grind greater and can be extra inspired by this view, ought to the multi-month uptrend stay intact.

GBP/USD Each day Chart

Supply: Refinitiv

GBP/USD Web Speculative Positioning (% of OI) – 3yr z-score

Supply: Refinitiv

EUR/GBP Vary Revered as Fundamentals Wait For The Techs To Align

It has been a one-way commerce for EUR/GBP for the reason that starting of the yr with the cross down 4% YTD. The unwind of a Brexit risk-premium and a beneficial vaccine rollout program has been among the many key elements behind the persistent slide. That mentioned, the basics proceed to assist the view that the bearish pattern can proceed with the UK saying a roadmap to normalisation, whereas the EU are heading in direction of their third Covid wave. Wanting on the chart, technical haven’t essentially aligned with the basics as of but, given EUR/GBP has consolidated between 0.8540-0.8640 for the reason that backend of February.

In the meantime a bullish divergence on the RSI has additionally act to halt the downtrend. The bears, nevertheless, will take consolation within the RSI’s failure to interrupt above 50 with the cross persevering with to respect the well-defined vary. For Q2 the vary break would be the first space of curiosity with a break under prone to see an extension of losses towards 0.8400-0.8450. Ought to the cross make a convincing break above, a restoration may take EUR/GBP again to 0.8750. Though, a restoration is prone to symbolize engaging ranges for renewed promoting ought to the pattern stay under 0.8850.

EUR/GBP Each day Chart

Supply: Refinitiv