The British Pound has reached its highest levels since August of 2009. Clearly, the trend since last July has been higher. On the surface, everything seems hunky dory however, a deeper look reveals a growing disconnect between the market’s current pricing and the commercial traders’ expectations of the British Pound going forward.
Working back to the lows of last July, the commercial traders’ position grew to net long nearly 104k contracts. Their buying supported the British Pound at $1.50. Currently, the commercial traders are net short about 63k contracts. This is the largest net short position they’ve had in play since February of 2011. The commercial trader group has been very successful at the major turning points in this market and there is no reason to believe that their success won’t continue. You can see their trades and the current setup on this chart.
We published a sell signal in the British Pound to our clients last night for the beginning of this trading session. Our strategy will only risk the trade to Thursday’s swing high of $1.6812 via a protective stop loss order working in the market. The first support level for this trade is around $1.64 with deeper support around $1.6250.
