Having staged a strong recovery rally through the 1.5660 level the past week, risk of further strength is expected towards the 1.5906 level. This level could present a strong resistance on an initial test, but we think it should eventually give in and trigger further strength towards its Nov 12'10 high at 1.6183. A cut through there will clear the way for a push higher towards its Nov'2010 high at 1.6298. Its weekly RSI is bullish and pointing higher supporting this view. On the other hand, in order for the pair to resume its weakness off the 1.6296 level, a decisive violation of the 1.5344 level must occur to create scope for more declines towards the 1.5100 level and subsequently the 1.5000 level. All in all, GBP now looks to build on its recovery gains with the immediate risk being the 1.5906 level.
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