After the spread of Covid-19, central banks have begun to announce the multi-trillion bond-buying programs across various maturities while pushing the interest rates down to record low levels on a global scale. FED has recently announced unlimited bond-buying while Bank of England’s (BOE) bond-buying program has been announced as £645 billion. Under the light of these developments, GBPUSD rallied from 1,1430, the lowest level since 1985, up to 1,2485.
Recent Commitment of Traders (COT) data on the other hand tells another story. The recent data imply that, non-commercials COT index is at 71% as of March 31, 2020, down from 89% that was once seen back in February 6th, 2020. Given that such move materialized while the pair was moving from 1,1430 lows to 1,2485 interim highs, confirms that funds are preparing for a second wave of sale pressure.
From an historical perspective, market’s quick short biasedness suggests that short positions are dominant already and will remain so for weeks to come, suggesting that, GBPUSD is headed to as low as 1,1980 and beyond in the weeks or even days to come.
Sell the GBPUSD on highs.