FxWirePro: Retail long positions declining fast as GBP/USD moves higher

Retail longs are in decline,

• GBP/USD has moved higher after finding support around 1.30 area, at a rising trend line that has been in place since November and has lent support to the pound thrice since.
• Though retail positioning still favors the bears, the rapid decline in retail positioning suggests that pound might continue its reversal.

Retail sentiment:

• The sentiment reports from IG Markets, which is a UK-based company providing trading in financial derivatives such as contracts for difference and financial spread betting, points to a bearish bias in the pound.
• IG markets’ retail positions data provide a glimpse to retail traders’ positions, which are largely used a contrarian indicator since retail positioning moves in opposite direction to market movements.
• As of today, according to data from IG markets, only 43 percent of retail positions are bullish on GBP/USD, while 67 percent are on the short side, giving bearish bias to GBP/USD.
• However, rapid decline in long positions suggests that GBP/USD might move higher in the coming days, which is aligned to our outlook that the pound would move higher to test resistance around 1.34 area.
• On Friday last week, 70 percent of the retail positions were on the long side, while 30 percent were short. But the long positions declined to 60 percent by Wednesday. Today, it has declined further as the GBP/USD moved higher.