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British Pound Forecast to Fall Even Further until this Changes

British Pound Forecast to Fall Even Further until this Changes

2016-01-21 21:10:00
David Rodriguez, Head of Product
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British Pound Forecast to Fall Even Further until this Changes

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GBPUSD– Retail forex speculators continue to buy aggressively into British Pound weakness versus the US Dollar, and a contrarian view of crowd sentiment points to further GBP/USD losses. Our data sample shows more than 70 percent of all open GBP/USD positions are long.

Sentiment is marginally less one-sided than it was just two weeks ago when positions were over 75 percent long, but the fact remains that the vast majority of retail speculators continue to buy into dramatic declines. And thus we’ll reiterate the warning which we’ve covered through the past month: these episodes of heavily stretched positions can and have coincided with important price extremes.

It’s certainly possible that such one-sided sentiment points to a price reversal, but major extremes and reversals are only clear in hindsight. We’ll continue to watch for GBP weakness until crowds relent.

See next currency section:USDCAD - Canadian Dollar May have Set Significant Price Low

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com

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