GBP/USD has continued its advance from last week as it closes in on a 16 month high of 1.6309. Cable broke through several key levels of resistance last week, first at 1.6067 before then pushing on through 1.6124. The strong advance this week has been aided by the perceived progress being made in the US regarding proposed tax hikes and spending cuts, necessary in order to stave off the fiscal cliff. This has led to the Greenback depreciating against the majority of its counterparts this week and for Sterling this has meant the 1.6309 target has remained well in sight.
The pair have been trading consistently within a 10 cent range for over a year now and a break outside of this range could potentially move that ten 10 cent range directly above where it currently is.
Consequently, a consistent break above 1.63, and the current 16 month high of 1.6309, could well bring about a new trading range with a high of 1.70+. However, in the short term, the next key levels of resistance likely to be targeted are 1.6333 and then 1.6418.
The Bank of England minutes for December were released earlier this morning and confirmed that the Monetary Policy Committee voted for unchanged Quantitative Easing as expected. Although one member did back increasing asset purchases by £25 billion, this is unlikely to have much of an impact on the markets. Although, with little downside sentiment attached to this data, this could stoke a fake break out above 1.6309 before the pair drops back off.
With UK Retail Sales and US GDP figures due out tomorrow, and UK GDP data set to be released Friday, there still remains potential for increased volatility in GBP/USD over the next couple of days, not forgetting that the fiscal cliff has by no means been conquered just yet. However, with Cable nearing a 16 month high at present, regardless of any potential movement, now is certainly a great time to buy Dollars.
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From everyone here at Currency Matters we wish you a very happy Christmas and a healthy New Year.