1.6617 was the August 2011 highs we were struggling with previously but that’s well and truly buried now. The next big targets on the shopping list are the Apr/May 2011 double weekly high at 1.6747, the Nov 2009 high at 1.6877 and the 100 mma at 1.6965.
GBP/USD weekly chart
The 200 mma was also taken in the rally through 1.6617 but we haven’t managed to spend a month above it since Sep 2008.
GBP/USD monthly chart
If we break the 1.6747 high then the top of Oct 2013 trendline comes into play at 1.6785.
GBP/USD daily chart
We know levels are there to be broken and with some possible softness coming into US data, and the UK still posting decent figures, the pound has needed no excuses to run higher. It’s a fairly strong move but I’m in two minds whether it will persist in the near term. When cable wants to go on a run then nothing can usually stop it. All eyes are on the big 1.70 mark but there’s a lot of work to do before we even think about hitting that level. If we do get that high then we can expect the BOE to maybe start jawboning about the strength which could put a top in place. If inflation slides like it is in Europe then that will add pressure also, if thoughts turn to easing rather than tightening. We’re a long way from that though but it’s something to bear in mind.
I’m toying with scaling in some long term shorts from here through the big levels I’ve highlighted up to a break of 1.70 but that’s going against the grain of my thoughts that the UK will continue to recover ahead of the pack, which would be further bullish for the pound.
In the short term the 200 mma and the 1.6617/20 level should be monitored for decent support coming in and then the lower Nov 2013 support line at 1.6505.
