{"id":34679,"date":"2016-06-05T01:21:09","date_gmt":"2016-06-05T08:21:09","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=34679"},"modified":"2016-06-05T01:21:09","modified_gmt":"2016-06-05T08:21:09","slug":"the-currency-market-is-lagging-a-dramatic-shift-in-brexit-sentiment","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2016\/06\/05\/the-currency-market-is-lagging-a-dramatic-shift-in-brexit-sentiment\/","title":{"rendered":"The Currency Market Is Lagging A Dramatic Shift in Brexit Sentiment"},"content":{"rendered":"<p>In late February, I wrote &#8220;<a href=\"http:\/\/seekingalpha.com\/article\/3925506-forget-yuan-devaluation-british-pound-breathtaking\" target=\"_blank\">Forget The Yuan &#8211; The Devaluation Of The British Pound Is Breathtaking<\/a>.&#8221; At the time, I suggested that Google Trends on the search term &#8220;Brexit&#8221; indicated that the breathtaking losses in the British pound should soon abate (against the U.S. dollar). Sure enough, the pound printed a bottom within a few more days.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_34680\" aria-describedby=\"caption-attachment-34680\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/06\/160603_GBPUSD.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/06\/160603_GBPUSD.png\" alt=\"The British pound is still holding its bottom against the U.S. dollar set in late February, 2016.\" width=\"550\" height=\"375\" class=\"size-full wp-image-34680\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/06\/160603_GBPUSD.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/06\/160603_GBPUSD-300x205.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-34680\" class=\"wp-caption-text\">The British pound is still holding its bottom against the U.S. dollar set in late February, 2016.<\/figcaption><\/figure><br \/>\n<strong>Source: <a href=\"http:\/\/www.freestockcharts.com\/platform\/v1\" target=\"_blank\">FreeStockCharts.com<\/a><\/strong><br \/>\n<\/center><\/p>\n<p>The signals from Google Trends worked very well then. However, a divergence appeared in April with interest in Brexit heating back up. In mid-May, interest in Brexit reached new highs.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_34682\" aria-describedby=\"caption-attachment-34682\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/06\/160605_GoogleTrends-Brexit.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/06\/160605_GoogleTrends-Brexit.png\" alt=\"As the June 23rd vote on Brexit approaches, search interest in Brexit has soared to new all-time highs.\" width=\"550\" height=\"296\" class=\"size-full wp-image-34682\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/06\/160605_GoogleTrends-Brexit.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/06\/160605_GoogleTrends-Brexit-300x161.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-34682\" class=\"wp-caption-text\">As the June 23rd vote on Brexit approaches, search interest in Brexit has soared to new all-time highs.<\/figcaption><\/figure><br \/>\n<figure id=\"attachment_34683\" aria-describedby=\"caption-attachment-34683\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/06\/160605_GoogleTrends-BrexitRegional.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/06\/160605_GoogleTrends-BrexitRegional.png\" alt=\"Interest in Brexit is heavily concentrated in the United Kingdom and Ireland. No other country comes close.\" width=\"550\" height=\"272\" class=\"size-full wp-image-34683\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/06\/160605_GoogleTrends-BrexitRegional.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/06\/160605_GoogleTrends-BrexitRegional-300x148.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-34683\" class=\"wp-caption-text\">Interest in Brexit is heavily concentrated in the United Kingdom and Ireland. No other country comes close.<\/figcaption><\/figure><br \/>\n<strong>Source: <a href=\"https:\/\/www.google.com\/trends\/explore#q=brexit&#038;date=1%2F2016%2012m&#038;cmpt=q&#038;tz=Etc%2FGMT%2B7\" target=\"_blank\">Google Trends<\/a><\/strong><br \/>\n<\/center><\/p>\n<p>Yet, as the earlier chart shows, the British pound did not make new lows against the U.S. dollar as Brexit interest reheated. While the pound suffered a notable setback in the first half of May, it made a comeback in the second half of May. It took a new poll indicating a small tilt in favor of leaving the European Union (EU) to bring the rally to a complete halt. <\/p>\n<p>The divergence also shows up in the positioning of speculators. Speculators in the British pound began pulling back from net short positions in mid-April just as Brexit interest reheated. Speculators have not shown any inclination to increase net shorts again. Levels of short interest have stabilized over the past several weeks. <\/p>\n<p><center><br \/>\n<figure id=\"attachment_34685\" aria-describedby=\"caption-attachment-34685\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/06\/160605_cot-GBP_USD.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/06\/160605_cot-GBP_USD.png\" alt=\"After three weeks of straight declines from recent highs in net short interest, speculators have held levels relatively steady.\" width=\"550\" height=\"550\" class=\"size-full wp-image-34685\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/06\/160605_cot-GBP_USD.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/06\/160605_cot-GBP_USD-150x150.png 150w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/06\/160605_cot-GBP_USD-300x300.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-34685\" class=\"wp-caption-text\">After three weeks of straight declines from recent highs in net short interest, speculators have held levels relatively steady.<\/figcaption><\/figure><br \/>\n<strong>Source: <a href=\"https:\/\/www.oanda.com\/forex-trading\/analysis\/commitments-of-traders\" target=\"_blank\">Oanda&#8217;s CFTC&#8217;s Commitments of Traders<\/a><\/strong><br \/>\n<\/center><\/p>\n<p>If my interpretation of Brexit interest remains correct, then the current divergence in financial markets from the dramatic shift in sentiment represents a unique opportunity to get ahead of the market. I interpreted heightened interest in a topic as meaning that market participants will get equally anxious about that topic. Anxiety in this case drives a sell-off in the British pound. A move to catch-up could be swift.<\/p>\n<p><a href=\"http:\/\/seekingalpha.com\/article\/3979845-currencies-reacted-violently-weak-may-u-s-jobs-report\" target=\"_blank\">The surprisingly weak U.S. jobs report may have already reawakened fear of event risk in the British pound<\/a>. Combine that with the earlier sharp reaction to the poll results, and it seems selling interest in the British pound is revving up for the final two and a half weeks going into the June 23rd referendum.<\/p>\n<p>For reference, here is the British pound against the Japanese yen (FXY). GBP\/JPY hit a new low in April that was more consistent with the move in Google Trends, but it still managed to bounce back sharply from there. A steep sell-off and a sharp rebound later, and a new sell-off is underway. This latest plunge could mark the beginning of a fresh low for GBP\/JPY&#8230;<\/p>\n<p><center><br \/>\n<figure id=\"attachment_34687\" aria-describedby=\"caption-attachment-34687\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/06\/160603_GBPJPY.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/06\/160603_GBPJPY.png\" alt=\"GBP\/JPY looks VERY &quot;heavy.&quot;\" width=\"550\" height=\"375\" class=\"size-full wp-image-34687\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/06\/160603_GBPJPY.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/06\/160603_GBPJPY-300x205.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-34687\" class=\"wp-caption-text\">GBP\/JPY looks VERY &#8220;heavy.&#8221;<\/figcaption><\/figure><br \/>\nSource: <a href=\"http:\/\/www.freestockcharts.com\/platform\/v1\" target=\"_blank\">StockCharts.com<\/a><br \/>\n<\/center><\/p>\n<p>Be careful out there!<\/p>\n<p>Full disclosure: net short the British pound<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In late February, I wrote &#8220;Forget The Yuan &#8211; The Devaluation Of The British Pound Is Breathtaking.&#8221; At the time, I suggested that Google Trends on the search term &#8220;Brexit&#8221; indicated that the breathtaking losses in the British pound should soon abate (against the U.S. dollar). Sure enough, the pound printed a bottom within a &#8230; <a title=\"The Currency Market Is Lagging A Dramatic Shift in Brexit Sentiment\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2016\/06\/05\/the-currency-market-is-lagging-a-dramatic-shift-in-brexit-sentiment\/\">Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[20,237],"tags":[1682,128,127,626,384],"class_list":["post-34679","post","type-post","status-publish","format-standard","hentry","category-forex","category-united-kingdom","tag-brexit","tag-british-pound","tag-fxb","tag-gbpjpy","tag-gbpusd"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The Currency Market Is Lagging A Dramatic Shift in Brexit Sentiment - ONE-TWENTY TWO: Trading Financial Markets<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/drduru.com\/onetwentytwo\/2016\/06\/05\/the-currency-market-is-lagging-a-dramatic-shift-in-brexit-sentiment\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Currency Market Is Lagging A Dramatic Shift in Brexit Sentiment - ONE-TWENTY TWO: Trading Financial Markets\" \/>\n<meta property=\"og:description\" content=\"In late February, I wrote &#8220;Forget The Yuan &#8211; The Devaluation Of The British Pound Is Breathtaking.&#8221; At the time, I suggested that Google Trends on the search term &#8220;Brexit&#8221; indicated that the breathtaking losses in the British pound should soon abate (against the U.S. dollar). 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Sure enough, the pound printed a bottom within a ... 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