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British Pound at Important Risk of Correction - When Might we Sell?

By , Quantitative Strategist
18 February 2014 15:45 GMT

Video Summary: The British Pound has pulled back on weaker inflation data and several signs suggest an important correction is imminent. When might we sell?

- GBP/USD has seen a huge run that possibly is becoming stretched

- Weaker CPI data and a silent BoE puts pressure on a push higher in the cable

- After a large correction, a return of USD strength is bearish near-term for GBP/USD

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British Pound Correlation to UK Government Bond Yields Grows Very Strong

forex_British_Pound_forecast_versus_US_Dollar_trading_body_Picture_5.png, British Pound at Important Risk of Correction - When Might we Sell?

Data source: Bloomberg

Chart source: R

Price Nears Critical Resistance as Momentum Remains Extremely Stretched in GBPUSD

forex_British_Pound_forecast_versus_US_Dollar_trading_body_Picture_6.png, British Pound at Important Risk of Correction - When Might we Sell?

Source: FXCM Trading Station Desktop, Prepared by David Rodriguez

Retail Forex Sentiment Has Pulled Back Somewhat but Remains Extremely One-sided

forex_British_Pound_forecast_versus_US_Dollar_trading_body_Picture_7.png, British Pound at Important Risk of Correction - When Might we Sell?

Source: FXCM Execution Desk Data, Chart Prepared by David Rodriguez

Forex Correlations SummaryView forex correlations to the S&P 500, S&P Volatility Index (VIX), Crude Oil Futures prices, US 2-Year Treasury Yields, and Spot Gold prices.

forex_British_Pound_forecast_versus_US_Dollar_trading_body_Picture_8.png, British Pound at Important Risk of Correction - When Might we Sell?

Data source: Bloomberg. Chart source: R SEE GUIDE ON READING THE ABOVE CHART

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com David specializes in automated trading strategies. Find out more about our automated sentiment-based strategies on DailyFX PLUS.

Contact and follow David via Twitter: https://twitter.com/DRodriguezFX

18 February 2014 15:45 GMT