Morgan Stanley’s head of global currency, Hans Redeker says to short at 1.6750 with a stop at 1.6870 looking for 1.6670 then the 50 dma at 1.6450.
He says cable is looking stretched at these levels and the market has got ahead of itself regarding pricing in rate hikes. Notes that as inflation is below target the BOE is unlikely to shift to hawkish. BOE minutes on Wednesday may reveal inclusion of more variables in forward guidance. Also expects weakness in Friday’s retail sales figures.
It’s not a bad strat from these levels and I’m still toying with taking a short up here myself, particularly ahead of the inflation data tomorrow. I’ll have to check with my sparrows about how business has been in Jan to gauge retail sales. Certainly the target at 1.6670 is achievable but 1.6450 may be a bit too far away in the current bullish environment.
Anyway, what do you boys and girls think?
