The reasons for holding GBP in your portfolio are few and far between, in fact the only reason I can see to buy and hold sterling is if the market is massively short and about to get squeezed. The price action last week in GBP/JPY suggested to me that this was the case and I managed to buy in at good levels in what has been a very nice trade, which always keeps me coming back for more. Now we need to clearly break above 150 to generate fresh momentum or in other words, get another short squeeze happening.
EUR/GBP also turned around very rapidly from the .94 handle suggesting a market which was overly long. If the BoE decides to continue with its QE programs, then it will be easier for GBP shorts to stay on their positions but any suggestions to the contrary could see EUR/GBP longs also bailing out. Market talk of solid buying interest towards .9050 from longer term players suggests to me that this market is perhaps not as saturated-long as I had thought.
Finally good old cable. It’s amazing to think that for the almost 25 years that I have been involved in the FX market, cable has always been seen to be the most volatile of all major currency pairs. Yet for this entire period, cable has basically been oscillating around 1.65; up 40 big figures, down 40 big figures but always returning to more or less the same level. This should be telling us something. Where to from here? No idea I’m afraid. Maybe we should go with the sizeable volumes and I hear that there are very good macro-type offers around 1.6600/50 and very good bids back towards 1.5800. Spot of range-trading with your cucumber sandwiches?
