Sterling May Tumble As Credit Markets Remain Tight
Last week I took cautioned that support at 1.500 could lead to a bullish opportunity, which is what we saw as the pair blew through my target of the 20-Day SMA to reach a high of 1.5383. Unfortunately, we saw another test of support before the bullish thrust, and if you didn’t set your stop well below the psychological level, could have seen your initial gains erased. The break above the 20-Day SMA exposes the 50-Day SMA at 1.5662. However, a weak mortgage approvals report could start to raise speculation that the BoE will add to their asset purchase program which could weigh on the pound. Therefore, I would wait for a break above 1.5423-38.2% Fibo of 1.6459-1.4785. Failure there could be an opportunity to get short with a move back below the 20-Day SMA a less risky entry point.
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