Overall technical outlook is consistent with trouble ahead
With regard to the pound sterling, three technical observations are worthy of note:
1. The weekly chart resistance at 1.6900 has turned back rallies during 17 different weeks since 2009. The market was poised for an upside breakout in recent weeks, but the bulls were unable to get the job done.
2. The daily chart has penetrated the lower boundary of an 8-month channel. This is a further indication that the resistance at 1.6900 has turned the market negative.
3. The CFTC Commitment of Traders data indicate that the profile of ownership is such that heavy liquidation of low positions by speculators could put prices at jeopardy. The last time the profile of net positions was similar to the current profile of ownership was in 2007 when the cable was trading well above $2.00. The pound declined 37% in the following 14 months.
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