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GBPUSD – The majority of retail forex traders in our sample remain long the British Pound versus the US Dollar, and a contrarian view of crowd sentiment leaves us firmly in favor of selling into declines.
Current positioning show that open GBP/USD-longs outnumber those short by a sizeable 2.2 to 1, and indeed the ratio has shown that ‘the crowd’ has remained net-long since the pair traded near $1.58 in August. It is worth noting that heavily one-sided sentiment often coincides with important turns in price; the crowd is often most long at key price reversal points. Yet such extremes are only clear in hindsight, and until we see a substantive shift in sentiment we will continue to watch for GBP/USD weakness.
See next currency section: USDCAD - US Dollar Targets Fresh Highs versus Canadian Dollar
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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