The "No" vote won the Scottish independence vote battle but it was the amateur traders that lost on currency markets on Friday. Many got sucked in trying to speculate and buy the Pound on a likely "No" vote. They got one thing right but the most important thing wrong. We talked about it all week that the Pound would likely benefit from a "No" vote win and I still hold that view. Over the medium to long term I expect the Pound to rally again but the price movement on Friday was a typical example and great lesson for us all on how to avoid being sucked into the grasp of the smart money. Here is what essentially happened to too many of the buyers.
The "No" vote was the likely victor in all polls leading up until ballot booths closed. The amateur traders couldn't help themselves and started buying the Pound on mass on the news of a "No" vote victory. And yes it did initially rally. But on virtually every Pound currency cross you will see this morning a quick and sharp pull back in price occurred. The smart money simply waited until the market was saturated with buyers and they sold the Pound off right back at them. Leaving the buyers confused, stopped out or wondering what to do next.
So where is the Pound likely to go long term? Back higher in my opinion but it may take a few days or a week or so before that overall trend gathers pace again. The UK economy is going to gain confidence again, now that the Scots are staying put. The interest rate speculation will gain momentum again once we receive some strong economic UK data that reminds the market that the Bank of England is likely to raise the official cash rate in 6 to 9 months.
Be patient and consider a long trade on the Pound via the LTG GoldRock Daily Order sheets. If you have any questions about how the markets reacted simply join us for our weekly live coaching sessions Monday & Tuesday at 5pm AEST. Go to www.ltggoldrock.com to register.
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