Thursday, January 22, 2009

Is it time to buy the British Pound?

The British pound has been falling since November 2007 and recently hit a 23 year low against the dollar. Is it time to buy?

Two contrarian indicators suggest that there may be an opportunity to play the pound from the long side.

First, as I mentioned in a post yesterday, Jim Rogers, who is cold as ice when it comes to his forecasts (shorting Treasuries, shorting the dollar, commodities, etc) recommended selling the pound the other day. Back in my days when I was a floor trader one popular trading tactic the savvy traders used to employ was "fading" traders in the pit who were on a cold streak. No one is colder than Rogers at this point in time, so it's probably a good idea to do the opposite of what he says.

The second contrarian indicator is Fox Business, which ran a story on its air yesterday about the weakness in the pound (see clip here). When Fox Business starts focusing on a theme, it's probably close to being over.

You can buy the pound via an ETF. That is the CurrencyShares British Pound Sterling Trust (FXB).

1 comment:

googleheim said...

Are they going to make a new currency to merge the dollar, the pound and the Euro ?

There would go the sovereignty of currency issuance.