GBP/USD Outperformance an Open Invitation to Fresh Sell Opportunities: Citi

Strength in the GBPUSD exchange rate could well give traders opportunity to sell the pair again say CitiFX.

The GBP/USD has once again broken over the 1.32 marker this week, and looks intent on defending these gains at the time of writing.

The US Dollar has seen sporadic bouts of strength, but there is a sense that the USD won't make any big directional moves until Janet Yellen's Jackson Hole speech has been navigated.

GBPUSD's ascent comes not just on USD weakness, but also genuine Sterling strength with some analysts suggesting the British Pound will struggle to weaken further now that data has shown previous Brexit vote forecasts to have been too pessimistic.

GBPUSD remains well supported for now though but the CitiFX Flows team notes corporates and banks are starting to turn net sellers.

“Nevertheless, the technical picture has improved with the pair trading just above 1.3175-80, a level that has held since the MPC's rate move on August 4 though a decisive move higher is needed to target the 1.3280/1.3300 major resistance area followed by 1.3370,” say Citi.

However, note the warning from the CitiFX Flows team that sees recent buying from real money buying accounts slowing and possibly reversing.

On the downside, Citi see key supports at 1.3090 & 1.3040, both previous lows and Fibonacci retracement from the August sell off.

Pound Outperforms, Resistance at 1.3320

GBP is outperforming with a 0.3% gain seen in mid-week trade.

The pair is rising for a third consecutive session to levels last seen in early August.

"The absence of domestic releases leaves near-term risk squarely centered on sentiment and positioning, with considerable vulnerability to strength as we note the record short CFTC positioning," says Eric Theoret at Scotiabank.

Scotiabank note GBPUSD short-term technicals are neutral and momentum signals are moderately bullish while trend indicators are muted with a trendless sub-25 ADX at 16.

"GBP has broken above both its short-term MA’s and appears set to test its 50 day MA (1.3327), a level that roughly coincides with the August 4 open and the 23.6% retracement of the Brexit drop. We look to resistance around 1.3320," says Theoret.