GBPUSD – Retail forex trading crowds have grown net-long the British Pound against the US Dollar (ticker: USDOLLAR), and our sentiment-based trading strategies have gone in the opposite direction.
Trade Implications – GBPUSD: Choppy GBP price action has forced our purely SSI-driven Momentum2 to go both long and short within the past week with mixed results. Our Speculative Sentiment Index most often works as a contrarian indicator to price action in trending market conditions. Most retail traders tend to buy weakness and sell strength, and such a mean-reversion strategy will tend to do fairly well in range-bound markets.
Our Senior Technical Strategist believes that the GBPUSD may continue recent declines, but we will need to see considerable follow-through on the recent US Dollar bounce to maintain confidence in our GBPUSD-bearish bias.
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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