FxWirePro: Short term outlook – Pound could rise to 1.485 against Dollar

Today's actions by Bank of Japan (BOJ) to reduced interest rates below negative has boosted stock around the world. Japanese Nikkei up 2.7%, S&P 500 up 0.8%, UK's FTSE up 0.9%, German DAX is up 0.3%.

With risk aversion subsiding, this environment likely to provide some support to Pound, which has been battered this year, due to risk aversion and risks specific to Pound.

This month, European Union likely to hold summit, to come to a resolution and to take up changes demanded by UK to stay in European Union. It is more likely that positive outcome would come from that summit, which would be Pound positive in the near term.

Moreover, Pound is showing some strength after reaching lowest level since the financial crisis of 2008/09.

Dollar on the other hand, likely to remain under pressure, as we expect FED to take more cautious approach towards further rate hike. So next rate hike may not come even June, but in September.

Trade idea -

With such fundamentals we expect Pound to gain in the short run against Dollar. Buy Pound against Dollar at current price 1.431, with stop around recent low @ 1.406 and target around 1.485 area.