News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bearish
Oil - US Crude
Bullish
Wall Street
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Bearish
GBP/USD
Bearish
USD/JPY
Mixed
More View more
Real Time News
  • A short-term ascending channel is under threat after Bitcoin’s first attempt to break through a stubborn resistance zone failed. Get your market update from @nickcawley1 here: https://t.co/RbnADE05iu https://t.co/HcrqaKg5F3
  • Is the Eurozone entering into a second debt crisis? Find out here: https://t.co/27Y8gKO0xY https://t.co/qHyg1KpVKH
  • And the Monday Asia trading session has officially begun. A pair to have on your watch list to kick off early trade: $AUDUSD post head-and-shoulders' neckline (and 200-DMA) breakdown https://t.co/iuYqEN5xpv
  • The ISM manufacturing index plays an important role in forex trading, with ISM data influencing currency prices globally. Find out about the recent history of ISM data, how to track it, and how to trade its release here: https://t.co/MZtBh88nOv https://t.co/DIP9cgoSUt
  • Here are the top scheduled event risks on my calendar for the coming week. Global PMIs, a few rate decisions, the Fed's bank stress test results, the Fed's favorite inflation indicator and a run of Fed speak among much more: https://t.co/3jIl4PvHiA
  • I know it is a cognitive bias, but it seems that every time I take a day off, there are significant market moves. Dow's tumbled into a 5th straight session Friday with 10-day correlation to Nasdaq most extreme negative in 4 years https://t.co/V3U6IOAEXz
  • *Reminder: Weekly Strategy Webinar tomorrow morning at 8:30am EST (12:30GMT) on DailyFX!! - lots to discuss on the back of last week's #Fed Fireworks! https://t.co/lxd5fZnn4H
  • Technical analysis of charts aims to identify patterns and market trends by utilizing differing forms of technical chart types and other chart functions. Learn about the top three technical analysis tools here: https://t.co/KDjIjLdTSk https://t.co/l0j9vLrMIp
  • Markets Week Ahead: Gold, Dow, Pound-Dollar, BoE Rate Decision, Fed Risk, PMIs Check out my recap of last week and preview of upcoming event risk, plus all the latest forecasts from the @DailyFX team below. Link to Analysis - https://www.dailyfx.com/forex/fundamental/forecast/weekly/title/2021/06/20/Markets-Week-Ahead-Gold-Dow-Pound-Dollar-BoE-Rate-Decision-Fed-Risk-PMIs.html $GLD $DJI $GBPUSD #Trading
  • Traders focus a lot of their energy on spotting the perfect time to enter a trade. While this is important, it is ultimately where traders choose to exit trades that will determine success. Learn about the three types of trading exit strategies here: https://t.co/muYkTNXH7s https://t.co/hbZPJmoOHe
British Pound Plummets to Lows, but is it Too Much Too Soon?

British Pound Plummets to Lows, but is it Too Much Too Soon?

David Rodriguez, Head of Product

The British pound has fallen to its lowest levels since 2010 as professional traders pile into short positions and disappointing economic data worsens GBP malaise. But we’re seeing evidence that the rally might be too much too soon, and indeed there’s material risk of a short-term bounce.

The British Pound has fallen about 5 percent in the past 3 weeks (15 trading days)—matching its worst decline since it hit multi-year lows in September, 2011. Indeed, the chart below shows that this 3-week Rate of Change has coincided with fairly important GBPUSD lows on many occasions.

British Pound Tumbles to Fresh Multi-Year Low Versus US Dollar

forex_british_pound_too_much_too_soon_body_Picture_5.png, British Pound Plummets to Lows, but is it Too Much Too Soon?

Source: FXCM Trading Station Desktop, Prepared by David Rodriguez

We likewise see evidence of extremely one-sided forex retail crowd sentiment as another sign of a potential GBPUSD low. Our proprietary FXCM Speculative Sentiment Index data measures retail forex trading sentiment via actual open trades. We most often use it to go against the crowd—if everyone’s buying, we typically want to sell and vice versa.

The SSI shows crowds have been long GBPUSD since it dropped below below $1.54 on June 26, which gave signal the British Pound might fall further.

Indeed, our sentiment-based Momentum2 system went short GBPUSD from $1.5377 and again from $1.5101. At the time we said that the US Dollar stood to rally further against the British Pound (GBPUSD decline) and others, and in fact Momentum2 was our favored GBPUSD trading strategy.

Since then however, forex trading crowds have bought so aggressively that we think it might be too much too soon. The total number of retail open orders long British Pound is at its highest since the GBPUSD set a major low in March of this year.

Retail Forex Traders Extremely Long the British Pound versus the US Dollar

forex_british_pound_too_much_too_soon_body_Picture_6.png, British Pound Plummets to Lows, but is it Too Much Too Soon?

Source: FXCM Speculative Sentiment Index, watch a video on the SSI

What does this all mean? In our opinion we could see a potentially significant GBPUSD low set in the next several days. Indeed our Senior Market Strategist Kristian Kerr thinks one-sided sentiment and cycle studies point to a larger US Dollar turnaround this week.

Kristian likewise points out that a major bank trading platform reports volume 3 times its recent range on the GBPUSD. Professional traders are usually on the correct side of the trade as they sell into downtrends and buy into uptrends.

But history shows that the pros are the most bullish at the top and bearish at the bottom; the big build in professional long positions warns we’re near a short-term turn. This is literally the opposite we see with our retail trader-based SSI data and helps confirm our SSI-based evidence.

Does this mean we’re looking to go long the GBPUSD today? Not exactly. I wrote on Monday that it’s quite possible the US Dollar gives back some of its recent gains, but I’ll actually look to a USD sell-off (GBPUSD bounce) as an opportunity to buy the dip (sell GBPUSD strength).

Our Senior Technical Strategist favors looking for an important near-term GBPUSD top near $1.50 or $1.51. And indeed, if the GBPUSD approaches key resistance it may represent an attractive selling opportunity.

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com

To receive the Speculative Sentiment Index and other reports from this author via e-mail, sign up for his distribution list via this link.

New to FX markets? Learn more in our video trading guide.

Contact David via

Twitter at http://www.twitter.com/DRodriguezFX

Facebook at http://www.Facebook.com/DRodriguezFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES