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FxWirePro: Retail sentiment points to further downside in pound sterling

The British sterling is likely to face further slide,

  • At least retail sentiment is pointing in that direction.
  • The pound has already declined around 400 pips since it tested key resistance around 1.32 area. Sterling is currently trading at 1.28 against the USD and further pain could be in store for the pound.
  • Weaker than expected economic numbers where GDP contracted in the final month of 2018, along with Brexit uncertainty causing havoc for the pound.

Retail sentiment:

  • The sentiment reports from IG Markets, which is a UK-based company providing trading in financial derivatives such as contracts for difference and financial spread betting, strongly suggest that the pound is set to decline further.
  • IG markets’ retail positions data provide a glimpse to retail traders’ positions, which are largely used a contrarian indicator since retail positioning moves in opposite direction to market movements.
  • As of today, the retail positions remain skewed to the upside. 66 percent of retail positions are on the long side, while only 34 percent are short on the pound, suggesting further slide.

 

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