Early Spring Line-up on Cable?

16th Oct 09, 0950 GMT

The Pound Sterling was the weakest currency (GBP/USD) amongst the 16 major currency pairs until last week, and then it started bouncing back around the 13th Oct, after a brief consolidation phase on the 12th Oct. Since then, the Cable hasn’t looked back and has extended its rally in today’s session as well, extending its gains to more than 3.5% in the last four sessions making a high 1.6400, the highest since 24th September.

All this comes on the back of weakness in the Greenback and economic recovery outside the US gaining pace, coupled with improved corporate earnings in UK. There have also been drops in jobless claims in the UK. 

The current situation presents a strong buy opportunity for short term traders, although long term traders may well have something to look forward to as well. The upper Bollinger line has already been penetrated, indicating that a short term uptrend has started. A target of 1.65 is well in sight, a level which has acted as a strong resistance in the past. Should that level give way, 1.7015 should be the target by year-end due to the lack of any major resistance in the band of 1.65-1.70. Keep a stop loss at the nearest short term resistance though.

The trend is likely to continue as the fed is unlikely to raise the interest rates in the US and RSI is already overbought. On the flip side, an interest rate hike could mean- watch out for your picnic baskets as Yogi is on the prowl!

Support

1.6265

1.6210

1.6155

Resistance

1.6355

1.6380

1.6425

GBP/USD