Stay long sterling or look to enter fresh long sterling positions. The price action observed on sterling over the past few sessions can only reinforce our view that the sterling bear trade is yesterday's trade. Not only is the British pound rallying on good economic news (see second-quarter GDP last week and CBI Trades survey earlier this week), but it has also proven highly resilient when it comes to digesting soft economic news. It now looks like we have moved from a $1.50-$1.55 range to a $1.55-$1.60 trading range and the pound has become a good buy at around or just below $1.5600.

Cable is now trading well above its 200-day mav (at $1.5547), well within a bullish channel, with further upside seen. Look for a move to $1.5717 (50% retracement from the biggest rally day in February), which would open the way for a move to $1.5815 (Feb. 17 high). We are gradually moving back toward fair value on cable (at around $1.60).

Stay long Swedish krona or look to enter fresh long positions. While the eurozone debt crisis increasingly appears to be yesterday's story, market attention is shifting on a highly supportive domestic environment. This has come through recent releases (see latest economic sentiment index) and will come through tomorrow's second-quarter GDP data. SEK has now broken through its 200 day mav (at 7.3013).

We recommend staying long the krona at current levels, with near-term support identified at 7.1023 (April low) and then this year's low of 7.0339 back on track. 7.00 is an important psychological support level. For those looking to enter long krona positions, the recent high of 7.3270 is a good selling opportunity on SEK pullbacks.

Bullish AUD/NZD outlook is intact. Our bull AUD/NZD call was validated by this week's price action and we would recommend staying long. As we suspected, the RBNZ hiked rates by 25bp, but the policy statement confirmed the view that the policy tightening will be gradual as the economy fails to impress, at this point.

Meanwhile, the RBA may opt for a wait-and-see policy outcome at next week's meeting, but the risk of a surprise rate rise cannot be totally ignored and the absolute and relative rate differentials will remain completely supportive for the aussie vs. the kiwi going forward.

AUD/NZD has broken through its 50-day mav (1.2318) this week, near-term resistance is identified at 1.2515 (May high). For those hoping to enter long positions, look for pullbacks toward 1.2400 and 1.2360 (previous resistance line) as good entry levels.
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