steve.jarvis's picture

Can we expect lasting Sterling strength post Election?

Since the UK General Election on 7th May, there has been widespread strength for the Pound, taking out key resistance levels against a number of other major currencies, including the US Dollar, Japanese Yen and New Zealand Dollar.  The question is, might this be the start of a significant further rise for Sterling, or is it just a short-term adjustment which may not be sustained?

Up until only a few weeks ago, Sterling was one of the top performing G10 currencies and this had been the case for many months.  As uncertainty grew regarding the outcome of the impending general Election, Sterling suffered a bout of weakness and looked set for a potentially quite deep medium-term retreat.  The unexpected majority secured for the Conservatives at the election, resulting in David Cameron's party being given the green light for another 5 years in office, has seen a turnaround in Sterling's fortunes.  Maybe even a resumption of the major underlying trend in some cases.

Recent highlights for Sterling include the following:  GBPUSD completed a multi-month base to set up a partial retracement of the medium-term decline;  GBPJPY has taken out a key lower top to initially reopen the late 2014 top, with scope for a break to yet new highs over coming weeks;  GBPNZD is through key highs established earlier in the year and is now at new 2015 highs.

GBPCAD, GBPAUD, GBPNOK & GBPSEK have all remained within major uptrends but as yet the outlook for these four rates is not certain. Technically, GBPAUD looks the strongest of the four, followed by GBPSEK, and these two cross-rates look most likely to break to new highs over coming weeks. GBPCAD & GBPNOK are not yet assured of fresh headway over coming weeks and the latest strength could potentially be to establish a lower top below those established over recent weeks & months, followed by a further correction lower over coming months.

All in all, as things currently stand, Sterling shows potential to be one of the best performing currencies over coming weeks & months, but as always, we would be wary of chasing the Pound higher - there may well be better entry points which offer a better risk / reward.   As always, TraderMade will keep a close eye on proceedings and our service subscribers will be the first to know of any changes, etc to the technical outlook, as they occur.  

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