GBP/USD Nudges Higher on USD Weakness, EUR/GBP Rallies, GBP/JPY Slips Lower

March 31, 2022

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GBP/USD, EUR/GBP, GBP/JPY – PRICES, CHARTS, AND ANALYSIS

Sterling is marginally higher against a weak US dollar.
Sterling is weaker against the Euro and the Japanese Yen.

GBP/USD Nudges Higher: A mixed bag for Sterling traders to look at today with GBP pushing higher against the US dollar and continuing its short-term fall against the Euro and the Japanese Yen. These moves are currently driven by weakness in the greenback, a pull-back by the Japanese yen from multi -year lows, and renewed buying interest in the Euro as markets continue to price in tighter monetary policy conditions.

GBP/USD has bounced back from its 1.3050 Monday low and is currently trading around 100 basis points higher. The majority of this move is due to the weakness in the US dollar with the US dollar index (DXY) down around 0.60% in the European session. US dollar weakness, due to the slightly better Ukraine/Russia backdrop, maybe fleeting with the greenback expected to be propped up by aggressive US monetary tightening this year with over 200 basis points of additional rate hikes priced in by the end of 2022. The Fed is now seen hiking rates by 50 basis points at the next two FOMC meetings as the US central bank looks to fight back against sky-high US inflation. The daily chart shows that a series of both short-term and medium-term lower highs continue to steer cable lower, leaving the recent 1.3000 double low vulnerable to any US dollar pullback.

GBP/USD DAILY PRICE CHART – MARCH 30, 2022

Retail trader data show 71.58% of traders are net-long with the ratio of traders long to short at 2.52 to 1. The number of traders net-long is 2.81% lower than yesterday and 8.47% higher from last week, while the number of traders net-short is 9.14% lower than yesterday and 21.33% 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.

GBP/USD Nudges Higher:

The Euro is being driven further higher as market participants continue to price in a series of potential rate hikes late during the back end of the year. The Euro Zone is also being hit hard by runaway price pressures with the latest German headline inflation reading – due out later today – expected to hit 6.3% in March, up from 5.1% in the prior month. Earlier today, data showed that Spanish headline inflation hit 9.8% in March, up from 7.6% in February, the highest level seen since 1985. The recent market reappraisal of potential ECB policy tightening has pushed EURGBP back to highs last seen over three months ago against the British Pound. The longer-dated 200-day simple broken average has also been broken for the first time since the end of last year, although price action needs to consolidate above the technical indicator if the pair are to push further higher. The recent push higher has also broken a long-term series of lower highs, and if this remains the case in the days ahead, the early March 0.8203 print may be a longer-term low.

EUR/GBP DAILY PRICE CHART – MARCH 30, 2022

GBP/USD Nudges Higher

The recent bout of Japanese Yen weakness, prompted by the Bank of Japan’s announcement this week that they will buy unlimited amounts of three, 10-year JGBs up to a yield of 0.25%, has unsurprisingly weakened the Yen against a range of currencies. Japan continues to struggle to fire up inflation, a multi-decade problem, while economic growth remains lowly. A look at the weekly GBP/JPY chart shows the pair have added forty big figures since March 2020 and has taken out all three simple moving averages with ease. Support between 156. 62 and 158.22 look likely to be tested and it may be prudent for traders to see if this zone holds or folds before taking any fresh position.