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GBP - 21 year high against USD


GBP has been hogging the limelight for past few days. The 21 year peak is well.. a first time in 21 years. To put it in perspective, the last time GBPUSD was at 2.0000 was in 1986. That is ages far away.

A lot of traders are questioning if we are entering a new phase where the markets will define new ranges for trading. If the answer is yes, then it is pretty much tectonic shifts in the strategies and trading assumptions. But either way, yes or no, the markets have been changed.

USD has been consitently weak the entire month. In my last post, when EURUSD was at 33, I had mentioned it is likely to come to 32-31.5. This was my expectation, not for the short, by expecting USD would show some signs of strength on the back of good divergences. But the ease with which the USD has been crashing through the floor is ample proof of how fundamentally the situation has changed in US.

Looking at the GBP chart on daily scale is the superb trending that is just getting strong. It has clearly broken above the 1.96 resistances. Logically I would like to see a test of these supports in the coming days. But, I would not like to advocate that again, as the USD has been particulary week against many currencies. The interest rates too seem to suggest the dollar weakness may continue. One of the surprises, the Fed can give is by raising interest rates. But that is like cold water treatment for already fragile housing sector. The options for Fed may be limited at this point in time. As a matter of fact, there seems to be nothing that can go in favor of US.
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