Comment: The FX market is expected to be far more fragmented and difficult next year as against 2011’s ‘risk on/risk off’ mentality. Cable should hold its own at the very least, and gain against the US dollar at best, one of the stronger currencies in 2012 partly, because on the Bank of England’s Trade Weighted basis, it is still very close to record lows (though technically trying to break above resistance that has held since 2009). Since 2009 Cable also has merely stabilised around 1.5500 in a large ‘triangle’, the bottom of this pattern coinciding with ultra-long term support at 1.4000, and ahead of two standard deviations below the mean (1.2875). Major long term resistance lies between 1.6500 and 1.7000, an area that capped for much of the late 1990’s, so prices are likely to hold below here for the next three months with dips, which really ought to hold above 1.5000, seen as buying opportunities. A weekly close above 1.7000 should take it up to 1.8000, maybe even an overshoot to 1.9000 in H2 2012.

A monthly close below 1.4000 would force us to review.