It has been a rather forgetful year for the British pound so
far as the currency lost close to 6.5% versus the U.S dollar
since the start of January. This makes it one of the worst
performing currencies on a year to date basis after the Japanese
DXJ--Best ETF to Play the Japan Rally
The economy suffered a credit rating downgrade of one notch by
rating agency Moody's in mid February this year. Also,
recessionary concerns have been plaguing the economy for a long
All these factors coupled with the escalation of the European
woes from the first half of this fiscal year have primarily been
responsible for the dismal performance of the currency versus the
U.S. dollar (see
Time to Buy the Australian Dollar ETF?
However, the vicious sell off in the currency has made the
currency inexpensive decent value proposition at this time. This
is especially true when considering the current level which is at
multi year lows. Therefore, for investors seeking exposure to the
Great Britain Pound (GBP) relative to the USD, this provides an
excellent entry point for investors.
Of course an easy way of doing this is to buy the
CurrencyShares British Pound Sterling ETF (
which tracks the performance of GBP versus the USD. Also, a chart
analysis of the ETF signifies that FXB might have finally found a
bottom after the sharp downtrend.
As we can see from the chart above, the ETF has been in a very
steep downtrend from the beginning of this year. FXB lost around
6.56% in the first quarter of fiscal year 2013. However, the
encouraging part out here is that the ETF has been showing some
sort of a consolidation of late with higher-than-usual volumes
Time to Sell the Steel ETF?
Also, FXB has very recently broken out above its three month
long downtrend as indicated by the green encircled portion in the
chart above. Still, it shouldn't be taken for a trend reversal
sign yet as there is no other concrete evidence of a reversal -
even on the fundamental side.
However, one could imagine that after such a vicious sell-off
the ETF could witness consolidation for a while. Also, it is
prudent to consider that some sort of strength is likely for the
ETF as the downturn can be considered a bit overdone.
From a technical perspective, this is evident from a Relative
Strength Index and the Williams R data, both of which point
towards the oversold territory (read
Has the Euro ETF Bottomed Out?
Additionally, with all that being said it must be considered
that the GBP is relatively inexpensive at this point. Given this,
a further downturn is highly unlikely, on the contrary, a modest
recovery in the GBP is certainly on the cards.
This makes a perfect case for a good entry point in the ETF at
the current level as it provides a relatively higher level of
safety for investors. Just note that FXB is currently trading
with a Zacks ETF Rank of 3 or 'Hold' so it is by no means a sure
thing, although technicals do point to an end to the bearishness,
at least in the short term (see more in the
Zacks ETF Rank Guide
Want the latest recommendations from Zacks Investment
Research? Today, you can download
7 Best Stocks for the Next 30 Days
Click to get this free report >>
CRYSHS-BRI PD S (FXB): ETF Research Reports
CRYSHS-EURO TR (FXE): ETF Research Reports
PWRSH-DB US$ BU (UUP): ETF Research Reports
To read this article on Zacks.com click here.
Want the latest recommendations from Zacks
Investment Research? Today, you can download 7 Best Stocks for
the Next 30 Days. Click to get this free report