Eyeing the Pound

Since Brexit the British Pound is down about ~20%. From July to October it has nicely consolidated above 1.28, but ultimately broke down last week. What I do find interesting is following Hollande’s comments exactly where the pound stopped and reversed.

Here is the a longterm view of GBP/USD first:

Screen Shot 2016-10-09 at 10.11.58 PM.png

With a bullish momentum divergence building and price below the 2009 lows, we could potentially be building a false breakdown here.

Next and an important factor to me is the huge long position the commercial hedgers (the smart money) have built and maintain.

British_Pound.png
Source: FreeCoTData

Zooming in on the daily, we can see the Pound with its yearly pivotal points. I don’t use these often, but we stopped on a dime and reversed this week following Hollande’s comments (whatever they were). Regardless of him, we can see demand and a nice hammer candle right at the low.

Screen Shot 2016-10-09 at 10.17.07 PM.png

Above S3, or the 1.28, line I want to be long GBP/USD or $FXB for a mean reversion false breadown play. I think we can back above the 2009 lows and that will fuel a rally to the down trendline from 2014 high. Thats about a 15% move. We will evalute further, once and if we get there.

I can’t seem to find any positive news articles about the Pound either, only negative or neutral. I love when everyone has the same opinion.

Take care.

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