One year outlook for GBP
Comment: The pound, in line with the Euro, is expected to see some sharp price swings throughout the next twelve moths. Ten cent shifts on the month should continue to be the norm, and may cause ‘extensions’ and ‘spikes’ on a regular basis. Support between 1.7500 and 1.7000 should hold over the next three months, allowing Cable to crawl back up to 1.8400 by year-end. Then more consolidation very roughly between 1.8000 and 1.9000 in Q1 2006, probably settling at 1.8500 at the end of March. More consolidation in Q2 2006, probably between 1.8200 and 1.9200/1.9500. Only in H2 2006 is long term US dollar weakness likely to re-assert itself, allowing this pair to squeeze to 1.9800 and maybe 2.0100 at the very end of next year.A monthly close below 1.7000 would force us to review.
