The pound sterling started the week off strong by rallying to a six-week high of 1.5489 but it has been unable to hold its gains and has faded to 1.5368.
The double-bottom at 1.4787 followed by today’s breakout certainly appears bullish but we are cautious of the potential for a reversal in light of the quick reversal today. One thing the bullish side has on its case is the low volume implied by the stock market. There was hardly any volume in stocks today, and if the same is inferred in forex, perhaps the reversal is less important.
The takeaway is that price action is bullish for cable but there should be some short-term caution. The double bottom targets 1.60 but perhaps the 50% fibonacci retracement at 1.5630 or the 61.8% target at 1.5820 are more realistic targets.