Forex Trading Crowds Sell British Pound as it Fails at Critical Resistance
GBPUSD – Aggressive forex crowd selling led our sentiment-based Momentum2 system to buy the British Pound versus the US Dollar, but a GBPUSD stall at critical resistance warns of a potential turnaround.
Trade Implications – GBPUSD: The purely sentiment-based Momentum2 strategy went long GBPUSD from $1.5280 and got taken out by its trailing stop on this morning’s US Dollar bounce (GBPUSD pullback). Similar to the EURUSD, the fact that the month-to-date high on GBP ($1.5605) occurred almost exactly at the US session open on the first day of the new month suggests it could be an important top.
Said peak is likewise the 50% Fibonacci retracement of the year-to-date GBP downtrend, and this is too much of a coincidence to ignore. Crowd sentiment suggests the GBPUSD has further upside, but we’ll actually look to sell against the highs based on forex seasonality patterns and critical technical levels.
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.