In our last Hedge Cuttings [Hedgehog members newsletter] we pointed out the unfolding structure in the British Pound…

“On the currency front, the pound is starting to exhibit action which could ultimately form a bottom and begin the slow trek back upwards, but it will be some considerable time before we are looking at switching back into dollars.  The first of the three criteria needed to reverse the trend is now in place, but we need to see all three before looking for sustainable upside in this market.  If all three criteria fall into place we could well be on our way again – a mirror image of the move down from 1.92?  That would be nice, but it would take much longer going back up than it did coming down.”

OK, well everything did fall nicely into place and we had confirmation of a new uptrend on May 6^th when the GBP-USD closed at 1.5149.  It hung around in that area for a few days and finally gave us a nice impulse that we always like to see at a trend reversal point.

It is pretty overbought at this time, so we should expect a bit of short term consolidation now.  (The first pullback to the 1.54-1.55 area would be expected to hold as support, if it even comes in that far.)

A new uptrend confirms that the Pound has a bottom in place and the long hard slog back up should take place over the coming months.  As always we have no idea how far the new trend will take us, all we know for now is that the trend is up and momentum is increasing so for the time being higher prices are to be expected.  Remember though that bull markets are much slower to unfold than bear markets, so we won’t be looking to switch back into Dollars any time soon.

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