We reviewed this pairing at the start of January, expressing some optimism for Sterling against the US Dollar. To our surprise, GBPUSD and the FTSE both opted to start this week outperforming themselves and as always, the blame was laid on Covid-19. The thinking, apparently, is fairly simple. The more people vaccinated, the faster economic recovery should be as Lockdown restrictions are eased. Airline stocks will fly again, cruise lines will float off into the sunset, oil prices will bubble up, and the hospitality trade shall re-open.
The big question, one which shall consume the media, remains unanswered, ‘Will our vaccination passports sport blue or red covers?’ Maybe the public shall be required to exhibit a tattoo on their forehead…
An important detail, or perhaps an admission of guilt, comes from the UK’s economic performance and the countries near 10% fall in GDP in 2020, the worst performance amongst the G7 group of wealthy nations. Despite this, Sterling is getting strong and the FTSE is starting to show early signs of proper recovery. We’d been expecting a crash but repeated profit warnings are “only” generating falls in share price around 6% rather than the traditional 20+%. Our thinking had supported a tsunami of share price drops forcing the FTSE into sharp reversal. This has not happened (so far), due to an outpouring of optimism due to vaccines administered and infection numbers falling. From reading international media, one could almost be convinced we’re at the onset of strong bull market conditions!
Will the FTSE head for 6,900+ and will GBPUSD demolish 1.5490? We’ll deal with the FTSE later this week but there remains some excuse for optimism with the currency pairing.
Presently trading around 1.390, the relationship needs exceed 1.392 to suggest near term traffic toward 1.406. We anticipate some stutters around such a level, if only due to the relatively huge jump possible to our secondary calculation. Longer term, above 1.406 works out with a target level of 1.4760, matching the high before the Brexit vote trashed the value of Sterling. Experience tends to highlight when a modest initial target appears, it’s almost as if the markets demand some volatility before discovering sufficient strength to reach a more distant secondary target.
For it all to go wrong for Sterling, the relationship needs founder below 1.320 to justify early concern.
FUTURES
| Time Issued | Market | Price At Issue | Short Entry | Fast Exit | Slow Exit | Stop | Long Entry | Fast Exit | Slow Exit | Stop | Prior |
| 10:24:00PM | BRENT | 62.97 | |||||||||
| 10:26:12PM | GOLD | 1819.14 | 1816 | 1808.5 | 1801 | 1824 | 1827 | 1829.5 | 1834 | 1816 | |
| 10:29:58PM | FTSE | 6765.08 | Success | ||||||||
| 10:32:13PM | FRANCE | 5786 | Success | ||||||||
| 10:34:08PM | GERMANY | 14120.11 | ‘cess | ||||||||
| 10:36:58PM | US500 | 3953.95 | |||||||||
| 10:39:00PM | DOW | 31653 | 31521 | 31491.5 | 31427 | 31609 | 31685 | 31701.5 | 31860 | 31590 | Success |
| 10:39:33PM | NASDAQ | Asleep | for | President | Day | ||||||
| 10:43:35PM | JAPAN | 30235 | Success |
