GBP/USD – Do You Want to Jump on a Crowded Trade?

The British Pound has lost about a quarter of its value since Brexit became a reality in June of last year. It´s obvious that there is a lot of political uncertainty ahead. This will, of course, affect the British economy for the worst.

PM Theresa May is activating Article 50 to leave the EU next week. All those who place the blame on the EU instead of on British politicians and on the financial cirsis, must be gloating.

Activating Article 50 is supposed to be a bad thing for the Quid, yet the GBP has rallied for about 400 pips against the USD over the last several days.

This is due to market sentiment, and of course, overcrowded trade. Short GBP has been and still is the most crowded trade yet. This recent pullback seems to be some sort of position adjustment before the big event.

The question is how´s the forex market going to react after it? My take is that we might see a spike or a short lived move downward before rising again. The short GBP trade is so crowded that once a group of forex traders start to take profit, the situation will snowball and the rest will start panicking.

No one knows how far this may go, but this would be the time to look for a long term short in this forex pair. I would prefer 1.30 or even 1.33 for the entry level, but I hope not to miss this opportunity.