Souring of our recent short term call (Pound dropped sharply against Dollar from 1.58 area, after false break of the range of 1. 54-1.57) has given an opportunity to enter into a longer term position with attractive risk reward.
Why pound seem vulnerable?
- UK over the past few years has been the fastest growing developed nation, with growth accelerating to the upside. However recent data is pointing to more gradual and subdued growth, even in UK's prized services sector. Manufacturing and construction hasn't peaked up enough pace.
- Considerable uncertainty lies next year regarding UK's future in European Union, as the country fight face exit if verdict comes such in proposed referendum. Such an issue would escalate UK's internal tensions with Scotland.
- In spite of rate hike rhetoric from Bank of England (BOE), it won't be easy to hike rates f China slows down further and financial market volatility escalates.
- Technically speaking, Pound has broken key rising trend line.
Trade idea
- Sell Pound against Dollar at current price (1.525) and at rallies, with stop loss around 1.582-1.585 area and target around 1.443-1.445 area.
Some interims targets are 1.517, 1.505, 1.485, 1.46 and resistance lies around 1.543-1.55 area.
