A bottom for the British pound just got more likely. The latest data from the CFTC shows that net speculators beat a major retreat from net short positions against the British pound:

Bearish sentiment is suddenly in major retreat on the British pound (FXB)

Bearish sentiment is suddenly in major retreat on the British pound (FXB)

Source: Oanda’s CFTC’s Commitments of Traders

The chart shows that speculators have not held such small net short positions since the surge began in early November. I consider this change significant enough to assume that the British pound has printed a bottom for now. I addressed other catalysts last week in “The British Pound Finally Attempts A Comeback.” Accordingly, I doubt another pound-specific catalyst strong enough to break recent lows will arrive before the June 23rd referendum on the UK’s membership in the European Union (EU). I am particularly referring to the bottom holding against the U.S. dollar.

Speculators may have confirmed the 50-day moving average (DMA) breakout for GBP/USD.

Speculators may have confirmed the 50-day moving average (DMA) breakout for GBP/USD.

Source: FreeStockCharts.com

Of course, a revival in policy divergence or a major reversal in tone from the Fed could send the dollar soaring again, but I am expecting neither. In fact, the U.S. dollar index is breaking down from its 200-day moving average (DMA).

The U.S. dollar index is breaking down. It now sits at a 5-month low.

The U.S. dollar index is breaking down. It now sits at a 5-month low.

Source: FreeStockCharts.com

The yen’s strength may become sufficient to break the recent low. However, if GBP/JPY also manages a 50DMA breakout, I will quickly drop my short on this pair.

GBP/JPY continues to linger under 50DMA resistance.

GBP/JPY continues to linger under 50DMA resistance.

Source: FreeStockCharts.com

The latest Oanda’s CFTC’s Commitments of Traders included some other big moves:

  • Speculators significantly trimmed net longs on the Australian dollar (FXA). I am now looking for the Aussie’s recent momentum to wane. It will not likely reverse until speculators get bearish again.
  • Net shorts against the Canadian dollar (FXC) fell for the seventh week in a row.
  • Net shorts against the euro (FXE) increased for the third week in a row.
  • Net longs on the Japanese yen (FXY) fell for the first time since February 1, 2016
  • Net longs have gone notably positive on the Swiss franc (FXF) for the the first time since January 18, 2016
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