British Pound May Strengthen Further
Forex trading crowds recently turned net-short the British Pound against the US Dollar (ticker: USDOLLAR) for the first time since the pair traded towards $1.57, and the GBP stands to gain further against the suddenly-downtrodden US currency. We use our Speculative Sentiment Index readings of crowd positioning as a contrarian indicator; if most are selling we prefer to buy and vice versa.
Crowd long interest fell by a significant 32 percent overnight, while the number of orders short jumped by a similarly noteworthy 25 percent. Given our simultaneously bullish Euro/US Dollar forecast and technical calls for further British Pound gains, we believe that the GBPUSD may continue its recent rally in the coming week.
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--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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