The strengthening pound sterling (GBP) could rise yet further, however gains will remain dependent on the vanquishing of key areas say analysts.
At the time of writing the pound to euro exchange rate is seen at 1.3635.
The pound to dollar exchange rate is at 1.5449.
“The surprise move of the day came from GBPUSD. Having dipped through support at 1.5355 Cable rallied back strongly into the close keeping the bull phase from 1.50 intact for now,” says a note from Lloyds Bank Research.
According to analysts 1.5550/1.5575 is still important.
Recent GBP strength was stunted on Tuesday following the appearance of members of the Bank of England before the Treasury Select Committee in the UK parliament.
The overall tone is that interest rate rises will come, however the timing is of the event is no less clear.
The UK data has been strong recently, especially employment, but it is not clear how committed the BoE is to normalising rates.
Is This the End of the GBP/USD Recovery?
Concerning the outlook for the pound dollar exchange rate we hear from Karen Jones at Commerzbank:
“GBP/USD is again testing the 23.6% retracement of the move down from July 2014 this is located at 1.5481. The market charted an outside day to the upside yesterday and this suggests that this resistance is more exposed.
“Elliott wave count on the daily chart is suggesting this was the end of the short term correction higher however the Elliott wave count on the intraday charts is more positive and a break back below the 20 day ma at 1.5279 is needed to alleviate upside Above 1.5490, will target initially 1.5618, the end of December high.”
Euro Sinks to New Lows against Pound Sterling
The euro pound exchange rate (EURGBP) has meanwhile lurched to new lows, but Lloyds Bank say the .7250 area is still a significant support zone and an area where they are looking for a potential base.
However, there could be scope for further declines says Jones:
“EUR/GBP remains under pressure following the erosion of its 200 month moving average at 0.7370. This new low was not confirmed by the daily RSI but we have now seen a close below here so will go with it for now.
“The Elliott wave count on the daily suggests that there is scope for a deeper retracement to .7700/.7905, but the intraday charts are more.”
“The market will remain directly offered below the .7713/67 region (October 2014 low). Key resistance remains the .7902 2013-2015.”
Key resistance is the 1.5855 November 2013 low suggests the analysis from Commerzbank.