Be Selective When You Short The British Pound!

The five common GBP pairs are: GBP/USD, GBP/JPY, GBP/CHF, GBP/AUD, and GBP/CAD. If you are bearish about the Sterling, make sure you have done enough homework before you short it because you can easily find yourself on the wrong side of the market. One of the reasons is that all these pairs are historically distressed as a result of the banking crisis in 2008 when the British financial system almost fell on its knees due to souring bets on subprime mortgages. Therefore, four out of the five pairs (with the exception of GBP/USD) have been consolidating within a tight range, making the risk/reward less compelling. However, the GBP/USD had a strong run from the middle of May until early August, rising from ~1.42 to ~1.60, thus making it the best target to bet against, in my opinion. As you can see from the chart, the pair declined sharply from 1.60 and has since been trading in the 1.5560-1.5690 range. I recommend selling the cross around 1.5625 (middle of the trading range) with a take profit and stop loss at 1.5355 and 1.5765, respectively. Happy trading! :D