GBP Rallies on Potential Brexit Breakthrough - US Market Open
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MARKET DEVELOPMENT – GERMANY AND UK DROP KEY BREXIT DEMANDS, GBP RALLIES
GBP: The Pound surges past 1.29 as reports stated that Germany and the UK are said to drop key Brexit demands and seek less details with regard to post Brexit ties. As such, much like Barnier’s comments at the back end of the last week, Brexit negotiating positions have been shifted, which in turn raises the possibility for an agreement to be reached. 1.30 now back in focus for the GBPUSD. Reminder, these are source reports so there could be a possibility for rebuttal, however, this emphasises that GBP is attractive on dips with the Pound more reactive to positive news.
USD: Given the upbeat headlines regarding Brexit the USD is now trading at session lows against the Pound and Euro. Elsewhere, the latest trade deficit figures could put the trade war tensions back in the spotlight with the US trade deficit with the EU and China yet again increasing.
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IG Client Sentiment Index: GBPUSD Chart of the Day
GBPUSD: Data shows 65.0% of traders are net-long with the ratio of traders long to short at 1.86 to 1. In fact, traders have remained net-long since Apr 20 when GBPUSD traded near 1.40186; price has moved 8.3% lower since then. The number of traders net-long is unchanged than yesterday and 0.9% lower from last week, while the number of traders net-short is 1.1% higher than yesterday and 11.2% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPUSD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse higher despite the fact traders remain net-long.
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--- Written by Justin McQueen, Market Analyst
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.