From a fundamental view, is there any reason this pair will stop running in the short term. Answer: NO. Many have said the pair is too high. Let's look at the components. Is the Bank of England OK with continued strengthening of the Cable? Of course, strong currency is a good thing for the Brits. Is the Bank of Japan OK with continued weakness in the Yen? They couldn't be happier, weak currency means strong exports and strong economy for Japan. Neither of the involved reserve banks have the intention of reversing this trend. If the non farm payrolls come out tomorrow negatively or low for the US showing continued slowing in the economy, what will happen to the pair? The Gbp will strengthen a lot as it is a strong currency right now. The Yen has been weak against the USD, a weakening currency matched with a weakening currency will not cause much change and what change occurs will be outweighed by the difference between the Gbp and Usd. No worries for the announcement or current fundamentals then.
Technically, we agree with the fundamentals (see graph). We have had a consistent bouncing at the Fibonacci levels throughout this climb. It would not be surprising to see a pull back tomorrow or Monday of upwards of 250-300 pips, giving an awesome entry position before running up to the -61.8% level or to the -100% level as market on the graph. If by chance we blast through the -38.2% Fib (223.85) in the next 2 days, I would not expect the pull back until the 226 level. If the pair was aggressive enough to reach the 226 level without a pull back, I would expect the next pull back to be more dramatic, possibly to the 222 or even the 221 level from the 226 ceiling. If we get a pull back now, the odds of another aggressive 600 pip climb is greatly improved.
