|S1: $1.3483||R1: $1.3566|
|S2: $1.3350||R2: $1.3594|
|S3: $1.3300||R3: $1.3620|
Wednesdays run up to $1.3607 proved to be short-lived but it served to show just how sensitive Sterling is to positively interpreted UK data. Post the UK retail sales number, the emphasis switched to the FOMC meeting in DC last night when we saw a spike to $1.3656 but a sell-off thereafter. The Fed took no action but signalled moves to come in October and December 17.
Sentiment was back in the driving seat again on Friday last week as the Cable chart went parabolic. There is little resistance of note beyond Friday’s high (R3) until $1.36864, a low from late Feb 2016. Sterling looks overbought as far as RSI 14 on the daily chart is concerned and it has unwound from here, over shorter time frames, suggesting a gentle drift lower in the absence of fresh upside catalysts.
Having previously had August 2018 in mind, markets now think a UK rate rise could come before the end of 2017. Of course, BOE comments have wrong-footed us before. But HSBC’s admission on Monday that had it been wrong about its $1.20 target and short bias on Cable shows how much the mood has changed among many traders in Sterling.