British Pound Expected to Gain versus Euro
GBPUSD – Despite a broader US Dollar (ticker: USDOLLAR) surge, the British Pound continues to hold above key lows and retail trading crowds remain aggressively short the GBPUSD. We most often use our FXCM Speculative Sentiment Index as a contrarian indicator. That is—if retail crowds are heavily short we often see price go in the opposite direction. Indeed, we’ve consistently called for continued British Pound strength since crowds turned net-short in early-April and the GBP traded near $1.58.
The British Pound’s resilience is impressive. Ideally we would want to see a more consistent build in retail selling to call for important GBPUSD strength. Yet the fact that traders remain net-short GBP but have flipped net-long EUR gives us an even stronger signal that the EURGBP may fall to fresh lows. Indeed, bullish fundamental developments for the British Pound support calls for GBP gains.
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--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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