The key principle is that overly optimistic sentiment can create overvalued assets, setting the stage for a correction. On the flip side, extreme pessimism can signal overlooked buying opportunities. By analyzing crowd psychology, contrarians seek to profit from the collective misjudgments of the market.
This prevailing bearishness within the retail segment often serves as a contrarian signal. When sentiment skews towards one direction, the market tends to do the opposite. This bearish tilt often functions as a contrarian signal. Market behavior suggests that when sentiment becomes overwhelmingly skewed in one direction, it usually precedes a reversal. In light of this, GBP/JPY may be poised for further upside. Of course, market dynamics are complex, and sentiment shouldn't be the sole basis for trading decisions.