Retail trading crowds have recently sold into British Pound rallies against the US Dollar (ticker: USDOLLAR), and a contrarian reading of crowd behavior calls for further gains. Yet retail traders are mostly range traders, and exceedingly low volatility often favors selling into strength and buying into weakness.
The average daily range on the British Pound/US Dollar is currently at its smallest in five years, and we hesitate to call for a major GBPUSD break higher given extremely quiet FX market conditions. If the British Pound remains below critical resistance at multi-month highs of $1.5770, we may indeed look to sell a turn lower towards month-to-date lows of $1.5460.
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--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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