British Pound Rally May Represent Key Turning Point
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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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