Sterling is currently trading around the 1.27 level against the US$ and is above the rising 40 week moving average of 1.2171, which is positive in the short term. We estimate the upside target to come in around the 1.37 level, which could well mark the end of this bullish phase. The 14 week relative strength index is now at 63%, which is not yet in an overbought area.
Looking further out, the sharp drop seen in August 2008 from 1.99 to 1.35 sparked off a long term bear trend, with a series of lower highs and lower lows, which is still valid today. It would therfore seem appropriate to hedge long positions on significant further moves to the upside.
Disclaimer
Our opinions are not a recommendation to buy or sell a security. Your decision whether or not to open a transaction should be based on your own due diligence and not on any representation we make to you.
