During the first quarter, consensus opinion was for US dollar strength which analysts got as the trend that started in July last year continued. However, after one of the fastest and longest price moves in years, they never thought things might be overdone. At US$1.46, the pound was oversold but bearish momentum had eased and the MACD was no longer clearly pointing lower. The weekly close above the 50-day moving average and trend line resistance set off the first in what should be a series of short-covering waves. We expect cable to rally to the half-way point at US$1.5875 where serious rethinking will probably take place. Allow for a final squeeze towards US$1.62.
