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British Pound Rally May Represent Key Turning Point

British Pound Rally May Represent Key Turning Point

David Rodriguez, Head of Product
British Pound Rally May Represent Key Turning Point

Why and how do we use the SSI in trading? View our video and download the free indicator here

GBPUSD–Retail FX traders have remained long the British Pound versus the US Dollar as the GBP/USD has traded into fresh lows. Yet a recent reversal in price has led to a similar shift in sentiment, and we are wary of calling for continued GBP/USD weakness.

Our data shows there are 1.4 open positions long the GBP/USD for every 1 that is short, and normally we would treat this as a contrarian signal in favor of declines. Yet long positions are down 8 percent since last week, while short positions are up 4 percent. It’s possible that this represents a mere stutter in the scope of the larger British Pound decline and US Dollar advance, but we hesitate to sell into the GBP/USD as it is likewise possible the tide has turned.

See next currency section:USDCAD - US Dollar Likely to Hit Fresh Highs versus Canadian Dollar

--- 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.

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