Last weeks were not the best for the British currency. GBP in relation to USD weakened from 1.3370 to 1.2890, going back by about 500 pips. This is a relatively significant downward movement, considering the recent low volatility prevailing in the currency market.
What attracts attention is the fact that at that time, speculators - leveraged funds, systematically increased their involvement in long positions on GBP futures. At the same time, short positions were reduced, which may mean a change in sentiment from bearish to bullish. It seems that the leveraged funds bought every drop in the value of GBP, averaging the long position on the futures market.
Chart: Leveraged funds net long positions. GBP futures. Source: tradingster.com
As you can see in the above chart, from March the GBP/USD is falling, and, in turn, the net long positions grow. Following recent CFTC data in the COT report, the advantage of long positions over short ones was 21.958 contracts. This is the highest value since June 2018.
Chart: GBP/USD, D1. Conotoxia trading platform.
The sentiment from bearish to bullish may change after the breakout of the upper limit in the downward channel - according to technical analysis. The important level is also 1,2890. Previously it has been a support level and currently it could be the first resistance. If it is broken the GBP/USD currency pair may rise in the short or in the mid-term.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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