The Pound: Too Much In The Price?

I have been somewhat chuffed by my recent contributions to Master Investor Magazine. In the first issue I called BG Group (BG.), just before the bid (lucky), but there was a method in the madness. Then in the latest issue, my message for Sterling was that above $1.50 it could head to $1.60. This may also have been a little jammy, as presumably if the brother of David Miliband had come to power with the help of the SNP, Cable might be nearer to parity versus the U.S. currency rather than where it is now (near $1.55). Of course, parity may still come one day soon – the day that Scotland leaves the Union. I take great enjoyment from the way that the nearer the UK gets to leaving the EU, the nearer Scotland gets to leaving the UK. This is because both ideas are based on the same hatred of a contempt of foreign Parliamentary control. The reality is that it is politicians who are the problem, whether they are from your own country or not.

But getting back to our currency, and the Pound is just over half way to getting to my target of $1.60. On the daily chart it can be seen how the cross has broken above the $1.5552 February peak, with the previous January $1.5584 high also in the present trading area. There is also the technical issue of the 200 day moving average at $1.5622, from which there was an initial retreat to start this week. Presumably there will be a fresh attempt at changing the near term trend for this market back to bull from bear – which it would be on a sustained clearance of the 200 day line. For those who wish to back such an idea we have the money management point of an end of day close back below the late resistance of last month at $1.5492. The alternative, perhaps less stressful approach would be to wait on an end of day close back above the 200 day line. This is particularly so given that so far we do not really know whether the rally for this cross is a honeymoon move as part of the squeeze on the surprise election result, or genuine enthusiasm with the prospect of five solid years of Conservative Government. I for one would plump for the former, despite all the tokenism associated with the latest batch of Cabinet appointments.

Finally, it is difficult to resist looking at Sterling/Euro, where it would appear that the upward trajectory is back on track, fuelled by the ongoing tussle between the Greeks and effectively, Germany. The latest twist, a possible referendum for Greece, looks to be a good one, as it would at least settle the matter once and for all and without the likelihood of further quibbling and dithering. On the technical front it can be seen how this cross served up a bear trap rebound for May from below €1.35. The view now is that we will be treated to a journey towards the top of a rising trend channel from November. The expected target here at the 2014 resistance line is as high as €1.45. At this stage the best money management point is regarded as an end of day close back below the 50 day moving average at €1.3807, while cautious traders might wish to wait on a clearance of €1.40 before assuming that the coast is clear above last month’s resistance.