My sleeper currency, as I like to call it, has been rumbling for you. Today as we venture into this New Year, I would like to bring your attention back to the opportunities that may well exist in the Great British Pound.
Great British Pound (GBP)
The last time I dedicated a full piece to the GBP was 06/27/13. In this piece, I looked at the longer-term potential of the GBP in addition to mentioning the potential for needing a breakdown on the weekly chart in order to develop the next bullish run. I would certainly suggest reviewing the piece linked above for my initial thoughts and charts for this currency.
One key thought per the article was: “The levels that I have given you are extremely important to watch, but your first priority on the long term of course will be to respect the 1.50 and aim for 1.65.” Well, my friends, we have recently tested the waters of 1.65. As we currently sit near this level, it is important to provide additional insight now.
On the Daily chart, I would like to draw your attention to what may end up a head and shoulders pattern. The neckline currently is not clean and still remains a little bullish in nature. I am still bullish this currency over the longer term, but this chart should draw your attention for a bit of potential failure. It is not impossible to conceive that this could fail without dropping and really respecting the original neckline territory around 1.62. Over the next number of days, I would be attentive to this potential for failure in the near term. If the head and shoulders pattern truly develops and completes itself, you might find the GBP in the 1.59 territory.
Moving on to the Weekly chart, it is extremely important to note our extended run.
After the piece that I published on 06/27/13, we did indeed see a break of the initial ascending channel (reference the article for initial thoughts). After that retracement, the run developed very nicely for us, but once again, I must caution that we may be in for a bit of retracement here. After months of bullish progression, a bit of failure would actually seem healthy for this currency. After a retracement or consolidation here on the weekly chart, we may find our next bullish opportunity and it just might be enough to really shake things up. For the moment, with the combination of the Daily and Weekly charts, I would be looking as stated before, for a near term failure.
Now, we arrive at the Monthly chart, which is definitely the one to beat. Our channel seen on this chart and highlighted in blue, has not been immaculate. (It actually began while looking like an inverse pennant.) As you can see, our latest bullish run as lovely as it has been, was quite simply the bullish push upwards through the channel. While that move was certainly important for our outlook, we haven’t yet begun to see the potential energy of this currency. The GBP has been bound since 2009. We are now in 2014. I personally believe that if this currency can blow the top off of this range in this year, we might very well see years’ worth of opportunity on the bullish side.
If you would like to participate in what may be a near term sell off of the GBP, but you do not wish to expose a significant amount of capital, please feel free to contact us so that we might be able to assist you in building a strategy suited to your risk tolerance. In addition, if you are looking for the long term potential in the GBP, but would rather not hold it in cash or trade it on the spot, give us a call and we will build an approach for you.
Contact us directly and we will be happy to assist you with GBP as well as other currency plays.
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Lindsay Hall is Chief Market Strategist with commodities specialists RMB Group. Get the latest futures and commodities commentary from Lindsay and the RMB Group on our Big Move Trades–an online report offering trading ideas backed by research. Questions about this report or trading futures? Contact us online or follow us on Twitter @RMBGroupFutures. Read disclaimers here.