The British Pound has now fallen for the 11th consecutive trading day—its worst losing streak in the past twenty years of forex trading. The turn in the US dollar is clearly the main culprit for such sharp GBPUSD declines, but we likewise see that recently bearish forecasts for the future of UK interest rates hurt outlook for the British Pound itself. These considerations aside, however, it is undeniable that the current wave of GBPUSD losses is overextended by any measure; we remain long-term bearish on the GBPUSD, but the near term is likely to see a noteworthy bounce in the downtrodden British Pound.
The chart below emphasizes the fact that the GBPUSD has only fallen 10 consecutive days once in its past 20 years of trading, and today’s drop would leave it at its 11th sequential drop.
According to our fundamental analysis specialist Terri Belkas, British Pound Fundamental Forecasts remain bearish, but we nonetheless believe that the Sterling could see a short-term rebound. An examination of our forex positioning Speculative Sentiment Index analysis shows that the majority of traders remain long the GBPUSD despite its recent tumbles. This has historically been a contrarian signal for the GBPUSD; that is to say, a positive SSI ratio suggests we may see further GBPUSD declines.
Yet a closer look at forex positioning in the GBPUSD shows that speculators have reduced their long exposure to the British Pound. When we see that forex traders remain net long the GBPUSD but have stop buying, this is typically a signal that we may see a short-term reversal of trends. Our Senior Strategist Jamie Saettele’s Technical Outlook for the GBPUSD remains bearish, but we all essentially agree that the GBPUSD is likely to recover some of its declines before resuming its descent. A hold of recent spike lows at 1.8512 signals that the currency pair may go on to test recent resistance at the 1.8800 mark, while a further upswing would meet further price ceilings at 1.9039. Written by David Rodríguez, Quantitative Analyst for DailyFX.com
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