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Mar 17 - 12:12 PM

GBP/USD - COMMENT-Funding Strains Set Free The Sterling Bears

By Paul Spirgel  —  Mar 17 - 10:20 AM

GBP/USD fell to a six-month low of 1.2055 as dollar funding pressures fueled demand for the U.S. currency.
funding pressures have filtered into FX forward swap rates, where the swap market currently trades at a premium over depo rates, making long GBP positions -- short dollar -- more expensive to carry DEPO.
The increased funding cost and falling GBP/USD spot price is likely to have significantly reduced GBP/USD spec long positioning 1096742NLNG, which as of last Tuesday, March 10, stood at 26,328 contracts -- when GBP/USD was 8 big figures above current levels.
The GBP/USD gross spec long was +56k.
Those GBP longs had only recently put in a 21-month high at +76k and likely were unwound, en masse, amid recent spot weakness.
The likely reversal of gross long sterling positioning highlights the weakened position of bulls.
GBP/USD bulls need to recapture the lower 30-day Bolli at 1.2378 and still won't gain momentum until cable rises above the 200-DMA at 1.2702.
A daily close below 1.2082 would put the Sept. 3 low at 1.1959 in focus, setting the stage for a protracted bear run to October 2016 lows by 1.1490, 2016's flash crash low.

GBP Chart: Click here

GBP Futures Pos Chart: Click here

Refinitiv IFR Research/Market Commentary


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