GBP/USD Squeezes Higher as Risk Sentiment Improves

GBP/USD – prices, charts and analysis

• First citizen to buy Silicon Valley Bank.
• Sterling stabilizes around 1.2250 against the US Dollar.

Most read: Latest British Pound: GBP/USD bullish trend intact but slowing down

Financial markets got an early boost Monday after US bank First Citizen BancShares announced it had bought failed US lender Silicon Valley Bank. First Citizen purchased approximately $72 billion in assets and loans from SVB at a discount of $16.5 billion, while the FDIC will hold approximately $90 billion of SVB’s assets.

The European banking sector rose at the start of the SVB news but has given back most of that outperformance as we write this.

European bank index futures

There is little UK data this week through Friday when the latest quarterly and annual GDP figures are released. Annual growth of 0.4% is forecast for the UK, while no growth is expected on a Q/Q basis.

To the right of GBP/USD, the US Dollar has a few more data releases this week with the latest US GDP look-ahead on Thursday and the Fed-favorite inflation gauge released on Friday being the two standouts.

For all market moving data releases and events go to DailyFX economic calendar

GBP/USD is trading around the 1.2250 level, although today’s range is very tight. The recent higher high pattern is broken while the higher low pattern is all but in place. All three moving averages are supportive while the CCI indicator starts moving lower and exiting extreme levels. Initial resistance level remains at 1.2292 ahead of 1.2300 and 1.2344 while there is a cluster of support between 1.2170 and 1.2210. Cable traders should wait for volatility to return to the pair before trading.

GBP/USD daily chart – March 27, 2023

Chart via TradingView

Retailer data is mixed

Retailer data shows that 48.89% of traders are net long, with the trader short to long ratio being 1.05 to 1. The number of traders who are net long is 2.64% higher than yesterday and 8.55% higher than last week, while the number of traders’ net short position is 3.60% higher than yesterday and 0.22% higher than last week.

We typically view crowd sentiment as contrarian and the fact that traders are net short suggests GBP/USD prices could continue higher. Positioning is more net short than yesterday but less net short than last week. The combination of current sentiment and recent changes gives us another clue mixed GBP/USD trading bias.

What is your opinion on this GBP/USD – bullish or bearish?? You can let us know using the form at the bottom of this article or contact the author via Twitter @nickcawley1.