Amid the first signs of what could be a de-escalation trade, GBP/USD is beginning to show the first signs of having reached a short term bottom on the charts. With a move to the upside of more than 0.5% at the time of writing, Sterling has moved off the low of $1.30881 and sentiment certainly seems to be behind it.
Judging from various retail social sentiment trackers, including that offered by IG, it seems as though somewhere in the region of 75% of retail traders are in support of GBP/USD moving higher. Many may take the contrarian view to retail over the long-term, particularly as the overall trend remains very bearish, but day traders are eyeing the opportunity of a move higher amidst the first signs of the de-escalation trade.
Although sanctions have been coming in thick and fast in the past week, the confirmation of oil and gas restrictions and the actual news has proven to signify a move in the opposite direction to what many were expecting. This is another potential case of buy the rumor, and sell the news as many trades have begun to swing in the opposite direction post confirmation from the US and EU on the actual actions that are going to be taken.
Whether these reversals are in fact real reversals of trend, or mere bear/bull traps is yet to be seen but there is certainly volatility in the air. During times such as these, you need to be particularly mindful of your risk management strategy, and make sure you have adequate stops in place at all times.