This is the point where sterling's rally may end
July 18 (Reuters) -Sterling's rally may be running out of steam, with events conspiring against those betting on bigger gains.
Investment in the pound has grown unwieldy ahead a Japanese central bank meeting on July 31 from which expected changes will undermine sterling carry trades, quickly followed by a Bank of England meeting on August 1 which might result in a rate cut.
For the many currently invested in the pound, the chance of two central banks changing policy that could undermine their positions is cause to adjust them, but where techs have supported them, they now represent a barrier to further gains.
The rally is stretched at the top of 20-week and 20-month Bollinger Bands and has reached the 100-MMA which helped to define the 2021 high from where pound plunged.
If technicals and fundamentals combine to influence another peak for the pound, the extreme stare of betting could result in an big correction. A failure to close above the monthly Ichimoku cloud in July may be followed by a slide when it twists around 1.2200 in October.
There is a strong chance that EUR/USD drops from its current level weighing GBP/USD upping pressure on other bullish trades.
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GBPUSD rally is stretched https://tmsnrt.rs/46bGZkX
GBPUSD monthly Ichimoku https://tmsnrt.rs/469uCFT
(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)
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