Ones to Watch: GBPUSD

The recent run in the pound has been impressive. It's up nearly 1 per cent across the board and GBPUSD is currently above 1.6400. But is this likely to last? The chief driver of pound strength has been risk appetite, which leaves it vulnerable in our opinion. We look closely at GBPUSD in today's One to Watch.

GBPUSD: 1.6500 was a key resistance level earlier this month and we think it will be used as a good sell-zone now as well. The sharp move higher has shown some real momentum, easily passing through 1.6350 – the 21-day sma and a key technical level. But while the pound continues to be driven by overall risk sentiment rather than its own domestic fundamentals (which are weak in our opinion) then its best to go with the market. But be prepared for a sharp reversal. If risk sentiment changes then the pound is at risk and a dip below 1.6325 – the cloud top - could be on the cards. It is also starting to look overbought on an hourly basis, with both the MACD and RSI indicators (see chart below) turning lower , which is halting GBPUSD’s move above 1.6450.

Source: Forex.com

27.05.2011