The reversal pattern that I mentioned in my post below has now been triggered. I think we are heading to the 1.5300 region initially. If and when we get there I think it will be perfectly feasible that 1.3500 will be mentioned again by so called experts. Prices make opinions, not the other way round.
One thing to note here is that when cable is weak, EURGBP tends to rise. I think there is every chance that we head back to .9805 in EURGBP and possibly higher. In saying this I assume that there are no balance sheet surprises out of the Eurozone banking system and that Eurozone investement grade credit spreads do not deteriorate relative to their UK equivalents. So ask yourself this; if EURGBP heads to parity, where does that leave cable? Above is a chart of Cable with EURGBP below it, so that you can see the general inverse relationship. Periods where this is not the case are short lived.
I am certain that the Eurozone banking system is in a complete mess, but for some reason Mr Market has decided to ignore this. Maybe if trade begins to contract again and Germany feels the pain this will resurface, but in the meantime there is no point arguing with the market as this has the potential to be an explosive one. A good article about global money supply which ties in with growth and debt deflation can be read here. Enjoy!
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