British Pound Sentiment Hits Multi-Month Extremes
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. Retail trading crowds are their most aggressively net-short GBP since the currency traded above $1.60 in May.
The fact that the British Pound broke out of its 3-month consolidative range favors further strength, but exceedingly low FX Options market volatility expectations limit enthusiasm for outsized GBPUSD moves. Viewed in light of implied volatility levels, we may indeed see the British Pound consolidate/trade in a range until its next major move higher.
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--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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