The decision of the Fed to NOT taper bond buys found many surprised, but the British pound was already well prepared for the next move. With strong economic indicators showing strength in the UK economy and stops waiting above 1.60, GBP/USD shot up around 300 pips and is now trading at levels last seen in January.
Cable paused below high yet minor resistance. It is temporary, or will it consolidate the big gains? Update
The big breakout can be easily seen on this daily chart:
The pound made a long way from the lows of nearly 1.48 in June to the current level of of 1.6130. Strong growth in Q2, strong PMIs in Q3, a faster drop in unemployment, and lately yet another forecast upgrade by the Bank of England all show that the economy is finally on its feet. There’s even fear of another housing bubble.
In the preview to the FOMC decision, the pound was noted as a strong currency that could benefit quite nicely.
Indeed, the surprising decision by Bernanke to refrain from tapering due to unconvincing economic conditions and tightening financial conditions sent GBP/USD above 1.60 and 1.61 was quickly conquered.
The pair currently trades at 1.6130, which is aminor line after somewhat capping the pair in January. Below, 1.6050 is another minor line after working as resistance in late 2012.
These lines precede the round 1.60 line which switches to support. It is followed by 1.5960, which capped the pair before the FOMC decision.
But with the US central bank hitting the QE pedal and the strength of the UK economy, we should be looking up: 1.6163, just below the stubborn resistance of 1.6170 seen in January. This is key resistance now.
If 1.6170 is broken, the next line is relatively far: 1.6250, and it is only minor. More serious resistance appears only at 1.63, which served as resistance many times in the past. Further above, the year-to-date peak of 1.6380 is also a strong line.
For more lines, events and analysis, see the GBPUSD forecast.
