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British Pound Likely to Trade Lower

British Pound Likely to Trade Lower

David Rodriguez, Head of Product

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GBPUSD – A recent shift in retail forex trader sentiment suggests that the British Pound may have set an important near-term top through recent price action. Last week we noted the opposite—a sharp turn in crowd positions favored GBP/USD gains. Clearly that call was late, and when the facts change we need to change with them.

Our data shows there are currently 1.9 open GBP/USD-long positions for every one that is short, and a contrarian view of crowd sentiment favors further declines. Indeed, this represents a substantive shift from just eight days ago when the same ratio was 1.2:1. If everyone is buying, we typically look to do the opposite and sell. The clear caveat is that there is risk the GBP/USD will instead stick to a tight range. Until sentiment shifts once again, however, the big-picture view remains bearish.

See next currency section: USDCAD - Canadian Dollar Hits the Skids, Losses Likely

--- 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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