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Wise-cracking Phil Hammond delivered his Spring Statement with a more optimistic outlook on the economy noting that there is “a light at the end of the tunnel” for the UK’s finances, though Brexit remains a big uncertainty on the horizon. His upgraded forecasts were delivered as advertised though we do note that the severe downgrades to the forecasts in November were only marginally better yesterday.
Sterling reacted positively to the rosier outlook and it is the price action in cable which has caught our eye. The daily candle chart shows that a bull wedge pattern had formed over the last few weeks. This means prices had been consolidating around 1.3850 with the potential for a break higher in line with the dominant longer-term uptrend.
GBP/USD Daily Candle Chart
Yesterday’s move up looks to have pierced the top of the wedge formation. Interestingly, when we drill down into the shorter time frame hourly chart, we can see that prices have retested that support area which also corresponds to the 50% retrace level of yesterday’s burst higher.
GBP/USD Hourly Candle Chart
This means that if we now hold above this zone, price action looks good for more upside in cable. Near-term targets once we get through the recent highs around 1.40 include the February high at 1.4145.
Of course, the Eeyores may have their say in which case yesterday’s break higher could be false and we then revert to range trading. Eyes on the unending US political soap opera plus next week’s EU summit will no doubt impact on direction in the near-term.
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