Pound looking to extend gains

Most of the key currency pairs remain in a holding pattern as the market awaits the next catalyst that could move markets. 

Pound
Source:Bloomberg

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.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.