British Pound May Stick to Tight Range
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GBPUSD– Our retail FX trader data shows the majority of open GBP/USD positions remain long, but a sharp recent shift towards selling paints a mixed picture for our sentiment-based price forecast. We have gotten caught on the wrong side of the trade for two weeks in a row—the majority of traders bought GBP/USD as it hit key lows and sold at highs. We most often do the opposite of what retail traders are doing, and clearly their outperformance means our strategy has failed.
The next question is simple—will the GBP/USD continue to trade in a choppy range? Our data shows retail traders tend to buy low and sell high, and such a strategy is well-suited to range-bound market conditions. We may need to see a notable jump in FX volatility to resume trading against the crowd; our sentiment-based forecast will remain unclear until this changes.
See next currency section: NZDUSD - New Zealand Dollar Forecast to Gain Unless this Changes
--- 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.