Retail traders have been aggressively buying the sterling since long positions are up by 18.9%. Yet, when retail is long and buying more, the GBP/USD normally sells off in the following days. In fact, more long positions don't necessary suggest more confidence in the direction of the current trend since many of those traders who just entered the markets are also leaving their protective stop losses just below the current price action.
Freddie Mac and Fannie Mae are not the solution but the main problem of the U.S. mortgage market since their sole existence gives incentives for investors to take more risks that they should. Indeed, excessive regulation in the U.S. credit markets continue to hold back the economy and the greenback could be vulnerable to a violent pullback in a wave of profit taking.
Short term patterns indicate that the US dollar is likely to weaken on balance for the rest of the week.
Growth in the second quarter for the US economy is expected to have improved by 2.8%. An inline print would be significantly higher than the preliminary estimate of 1.9% and an improvement from the first quarter’s reading of 0.9%.
Currency Strategist
The Fed minutes released this passed week confirmed what the market has been pricing in for some months now: the next move in interest rates is likely to come in the form of a rate hike. However, for dollar traders, the operative question is not whether the policy board will hike or cut, but rather when.