 Hello and welcome to CMC Markets on Wednesday the 13th of July in this quick market update and the rally in the pound over the course of the last two days has caught quite a few people out including myself we've seen a decent rally in the pound against the dollar we've also seen a decent rally in the pound against the end so what we really need to do now is reanalyze these two currency pairs to establish where the next key potential levels are likely to be so let's first and foremost start with the pound against the dollar ahead of tomorrow's Bank of England rate meeting now we've seen a decent piece of short covering over the course of the past couple of days we've gone back through that 131.20 level that I highlighted earlier this week in the Monday webinar and now I think the key question is where do we go to next I think what's really important in the context of this current rebound is this 131.20 area which we highlighted as the previous lows on the initial move down in the wake of the Brexit referendum vote we rebounded off there we rallied back to 135 before breaking down below that hitting 128 we're now back above 131.20 so really to sustain the current move in the pound against the dollar is really we need to kick on towards 135.30 also potential I think in terms of this bear flag that bear flag is now negated it's no longer valid and now we need to really look out as to what could potentially happen next so this arguably arguably could well be the beginnings of an inverse heading shoulders we don't know that yet this could be the left shoulder this could be a little bit of a head here ultimately the reaction now determines on what happens next so 131.20 on the downside is the next level if we're able to maintain the move above that then we could well head back to 135.30 but to really stabilize we really need to get back above 135.30 so this week's weekly close will be particularly important certainly in the context of the weekly chart and we can see that here at the moment as things stand we're on the cusp of a potential bullish engulfing week so we really need to sustain the gains that we've made in the last couple of days to suggest that a bottom for the pound is in so look look for a weekly close look at the support 130.1.20 look for the resistance at 135.30 if we drop back below 130.1.20 then obviously we could well retest the 130 level but we shouldn't just look at the pound against the dollar because what's driven the current sterling rebound is been a significant rebound in sterling yen that's been the primary driver of this week's sterling rally and it's a similar sort of story here as well this is the weekly chart that we've got for sterling yen and at the moment we're on the cusp the potential cusp of a significant weekly reversal as we are in the cable the only difference here is the rebound that we've seen in sterling yen has been much more aggressive in terms of the turn around and certainly if you look at where we've come from 195 to around 128 we are certainly due a significant rebound how that how that manifests itself in terms of a dolly yen rebound or a cable rebound we don't know but what we do need to do is keep an eye on the weekly close for sterling yen take that down a little bit further again it's a similar sort of story as we've had in the pound against the dollar only this time the support level is at 133.75 again that was a level that I referred to earlier this week so keep an eye on that particular level on any dip back down on the upside we do appear to have found a little bit of resistance just below 140 so ideally what I would hope to see is a breakthrough 140 to head towards the 147 level which we saw in the middle of June around about 146 147 also what we've also seen is the slow statistics on both the cable chart and the sterling yen chart are now starting to turn positive which does appear to suggest that the market is still quite short in terms of overall positioning and as such any potential surprise coming out of tomorrow's Bank of England rate meeting could potentially prompt further short covering in the pound so that's it for this weekly or this particular market update thanks very much for listening this is Michael Euston talking to you from CMC Markets