GBP/USD (current price: 1.4303)
Cable is trading close to the 1.43 level this morning, near the top of a flag consolidation pattern that has been the dominant formation since exiting a steep declining channel in March. The momentum is now neutral after more than a month of consolidation, but the declining 200-day MA is still 600 pips higher than the current price at 1.49, providing ample room for further upside correction. The news flow regarding the British referendum in June remains the primary driver for cable, as the FED is unlikely to raise interest rates anytime soon.
Our assessment: GBP/USD is expected to test the upper band of the short-term flag pattern around 1.435 before possibly heading lower again, towards the lows near 1.385, as a rally back to the 1.466 resistance remains in the cards.
