British Pound (GBP/USD) Under Pressure Ahead of Partygate Report and FOMC
GBP/USD Price, Chart, and Analysis
Civil servant Sue Gray’s ‘partygate’ report could be published as soon as today, according to media sources, and is likely to be very uncomfortable reading for PM Boris Johnson. This comes on top of news yesterday that the Metropolitan Police would investigate a number of events at Downing Street and Whitehall, only the second time that a serving UK Prime Minister has been part of a criminal investigation. If either the report or the investigation finds against PM Johnson, it is likely that he will find his position untenable. According to media reports, many Conservative MPs are waiting for the Sue Gray report to be published before they decide if they will submit a letter of no confidence in the PM to the 1922 Committee.
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While keeping an eye on UK politics, Sterling traders, especially GBPUSD traders, will be looking across the Atlantic where the Federal Reserve will be releasing their latest monetary policy report which is expected to detail the timing, and number, of future interest rate hikes and their plans to shrink the near USD9 trillion balance sheet. The market has already priced in between three and four 0.25% rate hikes this year in the US, along with the ending of quantitative easing by the end of March and the start of quantitative tightening by Q3.
Cable has drifted lower over the past week and is now back below medium-term trend resistance. The daily chart is suggesting a mixed outlook for the pair with the downtrend of lower highs in place, while the 200-day simple moving average continues to act as an additional layer of resistance. Against this the CCI indicator suggests that the pair are oversold, the 50-day simple moving average continues to move higher implying a more positive medium-term outlook, while Tuesday’s bullish candle may suggest that cable may move higher in the days and weeks ahead.
GBP/USD Daily Price Chart – January 26, 2022
Retail trader data show 53.21% of traders are net-long with the ratio of traders long to short at 1.14 to 1. The number of traders net-long is 0.44% higher than yesterday and 1.19% higher from last week, while the number of traders net-short is 2.52% lower than yesterday and 20.25% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bearish contrarian trading bias.
What is your view on GBP/USD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.