Bank of America Merrill Lynch are under the impression that we’re going to be seeings a potential long term top and bearish turn lower. They were looking at a break of 1.6824 as a catalyst for a run up to long term resistance at 1.7045 and 1.7167 before looking for a reverse.
GBP/USD monthly chart 17 04 2014
They got the break but there’s been no follow through and we’re back below the level now.
HSBC says that they “don’t believe the ingredients are in place for GBP/USD to break much higher from here” and are looking for US data to bounce back from the weather-related weakness and that GBP/USD will be especially vulnerable.
“In any event, the recent narrowing of UK-US rate expectations has not been fully reflected in the dip in GBP-USD, which could justifiably be closer to 1.64 than 1.67 based on this relationship,” they add
My new mates at Credit Agricole are on the flipside and say that the pound is well supported on the labour market improvements and despite the falling inflation keeping rate rises on hold it won’t hold back expectations that they are coming. They are long cable at 1.6640 and looking for 1.70+
The pound is looking to finish the week in a good position and we could very well see the next leg up after traders have had their Easter break. 1.7000 is potentially going to be a very very big level for the pair and we could see the same type of action we saw at 100 in USD/JPY. There’s plenty who will use that level to offload longs from the run up from 2012 lows and plenty who will like to go short.
Let battle commence!
