How to trade the battered pound

With so many traders falling over themselves to short the pound, John C Burford smells a rally. Here, he explains how to play the market turn.

Once in a while, I go off-piste to cover a market that is not one of my usual suspects. And today, the GBP/USD rate is offering a superb lesson in one of my major themes picking turning points at sentiment extremes.

In recent weeks, the poor old pound has lost a lot of value against the major currencies. The bloodbath is all over the mainstream press. I'm sure you'll have seen the headlines.

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OPEN INTEREST: 236,181
COMMITMENTS
36,02179,8704,660178,90497,356219,585181,88616,59654,181
CHANGES FROM 02/26/13(CHANGE IN OPEN INTEREST: 30,998)
4,89512,6142,87123,8267,97431,59223,459-5947,539
PERCENT OF OPEN INTEREST FOR EACH CATEGORY OF TRADERS
15.333.82.075.741.293.077.07.023.0
NUMBER OF TRADERS IN EACH CATEGORY (TOTAL TRADERS: 115)
2146932345884Row 8 - Cell 7 Row 8 - Cell 8

John is is a British-born lapsed PhD physicist, who previously worked for Nasa on the Mars exploration team. He is a former commodity trading advisor with the US Commodities Futures Trading Commission, and worked in a boutique futures house in California in the 1980s.

 

He was a partner in one of the first futures newsletter advisory services, based in Washington DC, specialising in pork bellies and currencies. John is primarily a chart-reading trader, having cut his trading teeth in the days before PCs.

 

As well as his work in the financial world, he has launched, run and sold several 'real' businesses producing 'real' products.