Mark me down for “break” as in cable won’t break the 2009 high, at least not in the month ahead. I’ve been a cable bull for awhile but it’s time to take a break.
The pound was the top performer in April and the US dollar was near the bottom of the pile. The rally in cable continued a trend that began in August and resulted in a 1700 pip rally.
The fundamentals drivers are still there, the UK economy is improving (although today’s construction PMI was a setback) and the BOE could make a hawkish shift at any point.
But the the technical drivers are fading. The measured target of the 2013 double bottom has been met and the fuel from breaking the 2011 high is spent. Now the pair faces the double hurdle of the 2009 high and 100-month moving average.
GBP/USD monthly
Finally, I didn’t mention cable in my seasonal package but it’s a softer month including 4 consecutive declines and losses in 6 of the past 7 years.
Bottom line: I think those levels will eventually break but first cable will retrace to the 1.64-1.65 range. Instead of tightening, the Bank of England will lobby the government to tighten mortgage rules, just like Carney did in Canada.