The pound remains one of the stronger currencies at the moment and has managed to continue holding its ground, particularly against the greenback. Not even a round of positive US economic data was enough to derail strength in the pair. US flash manufacturing PMI and existing home sales both came in ahead of expectations.
Later today we have inflation report hearings and mortgage approvals data out of the UK and this should give the sterling some direction. Yesterday’s Q2 credit conditions survey showed demand particularly for mortgage lending and corporate credit is increasing rapidly, with default rates falling. These will remain key factors for the UK economy and could see expectations of a rate cut ramp up sooner than the market thinks.
On the US dollar side of the equation we have the Case Shiller house price index, conference board consumer confidence and new home sales due out. Most of the data this week will help shape up the outlook of the US housing market.
Buying cable pullbacks a good option
GBP/USD remains above 1.7000 in Asia with traders seemingly just waiting for a catalyst before pushing the pair higher. The pair broke through 2009 highs over the past week and perhaps the rapid rise warrants some caution in the near term. A slight concern is that the pair might be a bit overbought at the moment.
There is an uptrend which has been in place since 2013 and this could come into play in the near term. While it is tempting to ride the momentum and push the pair higher, I would prefer to wait for a pullback before initiating fresh longs. Pullbacks into the uptrend support at around the 1.6900 level could be used as an opportunity for fresh longs.