Its been a good few weeks for Sterling traders as David Morrison commented on the Activtrades market piece:
“On a long-term chart, the 1.67 area looks like the next most significant level of resistance. Sterling also made solid gains against the euro and is now trading at its highest level against the single currency in twelve months. This is down to the fundamentals of a steady stream of better-than-expected UK data which appears to support the UK government’s “austerity” programme. No doubt the abject failure of France’s tax and spend policy has helped to bolster this viewpoint – Vivre la difference! “
I agree with Davids comments – yesterday we happily broke both the high of 2013 (1.6578) and the highs so far of 2014 (1.6601) and if we can close above them on both a daily and weekly basis then I feel that signals continued GBP strength. I’m then looking at 1.6744 – the 2011 high – as the next target followed by the 2009 highs of 1.7041. (An area I remember well back then as I had bought about 1.47 in a mixed speculative trade and hedge and got out at 1.6250 – only for it to continue heading north again.)
What could stand in its way? Well apart from new fundamental news that is damaging to the GBP or pushing USD strength the biggest technical indicator I see is the monthly 200MA (the green line in the monthly chart above). It’s not really moved in the last 6 years and has been hovering in the 1.66 handle region. However if you look back you’ll see it was enough to cap GBP long moves in both 2009 & 2011. Will it happen again in 2014? Well we shall wait and see. Personally I think Sterling is a stronger currency these days than back then but I shall just wait and let the market show me the way.
Lets see if it can break the 1.66 resistance, hold above it with confidence and then I think we’ll get a leg up to 1.70 handle.