The British pound surged higher after retail sales came out much stronger than anticipated. This is a market that I’ve been talking about for some time, and I recognize that the 1.30 level has a certain amount of psychological significance. The fact that we broke above there is a bullish sign, so having said that I think that the market will continue to go higher over the longer term, although it could be a bit messy in this general vicinity. I am a buyer though, I recognize that this breakout is significant in its psychological impact, and I believe that we can go much higher, based upon previous consolidation seen in this pair. In fact, I believe that the market will then go to the 1.3450 level above, but it may take some time to get there.
Signs of inflation?
The retail sales number coming out much stronger than anticipated of course could be looked at as a potential side of inflation as the numbers and the United Kingdom have been surprisingly robust. I believe that the “smart money” has been buying the British pound for some time, and the rest of us are just starting to catch up. I believe that we may get pullbacks in time to time, but those should offer buying opportunities for the longer-term trader. The massive surge higher during the day of course is a bullish sign, although I recognize that trends take a while to break, and even once they do get broken, we need to spend a bit of time convincing the rest of the market. I believe that the downtrend is over in this pair, but there is a lot of noise to overcome between the current level and the 1.3450 level above. Diligence and patience will be needed.
Written by FX Empire