In past few weeks, the pound has been the top performing major rising against the tide of a strong dollar, while other currencies like the Euro and the yen decline. After Brexit referendum was won by the exiteers in June this year and Donald Trump won US Presidency this month, the market fears similar up-rise of the right-wing populists in Europe. However, the pound is not out of the woods yet and it is now hovering below key resistance line.
One of the factors that energized the pound bulls is the High Court ruling that said that the government will have to seek parliamentary approval before triggering Article 50 but that is unlikely to prevent the triggering. It to the very best may prompt the government to disclose some of its negotiating stands to the parliamentary colleagues. In addition to that, this ruling might get overturned in a Supreme Court hearing.
With such outlook and a strong dollar, we suspect the pound not to have the momentum to break the key resistance. So it could bode well for those planning to go short in the pound against the dollar.
Trade idea:
We recommend selling pound at a current price of 1.254 and at rallies with a target of retest around 1.22 and 1.20. The resistance area around 1.275 will prove a tough nut to crack.
Those who are looking to trade intraday, can short pound using FxWirePro currency index (pound), which is available here, http://fxwirepro.com/fxwire, which acts as overvalued and undervalued indicator based on hourly values. To read more on the ways you can benefit from the indices, read here, http://fxwirepro.com/currencyindex.
