1) GB/US 2y yields show a strong divergence as the pair collapsed in the last trading week (green line)
2) The free-fall pushed RSI into oversold territory and formed a hidden bullish divergence (with the October 2019 low)
3) Economic surprises still favour a stronger US dollar, which is a headwind for the long setup.Economic surprises for the week March 9-13: USD 6/10 (bullish), GBP 3/10 (bearish)
4) Positioning: Futures traders cut around 20k of their GBP long positions and around 11k of their GBP short positions, which is slightly bearish for the pound
I still believe that the pound is a good value in the lower 1.20s and will follow the pair closely during the next week.
Comment
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Pair trading near 1.20 now. Correlations still well in tact, let's see whether this is a buy.