Cable downtrend looks ready to accelerate; 1.40 here we come.

The cable has a very nasty feel to it at the moment and the medium term sideways movement, which basically has been going for about 4 years, looks set to end. Chatter from the market suggests that both option and real money players are poorly positioned and if they have to start chasing it lower then it will fall vertically with levels back near 1.40 a possibility in coming months.

Don’t try and bottom pick this pair, that’s my advice, or at least wait until the interbank panic starts to subside.

If cable starts free-falling then EUR/USD will follow to some small degree though of course the EUR/GBP cross will go through the roof. Pairs like GBP/JPY will also be seriously affected and currencies like the AUD, CAD and NZD are also likely to follow the sterling, albeit lagging and at a much slower pace.