17 Oct 2007

1. News: UK CPI, one of the key economic indicator for inflation fell below expectation to 1.5%. The move suggest a impending inflation and strongly urge BoE to cut interest rate like its Fed counterpart. This CPI has been below the BoE's 2.0 pct target rate for three months running and has weighed on sterling since it raises expectations that UK interest rates could be cut before the end of this year.

Also yesterday, Federal Reserve Chairman Ben Bernanke said the slumping housing market remains a "significant drag" on the economy. Oil hit another high at $88, with the potential to erode away any weak dollars advantage the US economy enjoy in export. All showing more oreintation to a weaker economy.

BoE will meet to discuss interest rate today at 1630.
Also at 2030, US housing starts. A low level of housing activity signals that the construction industry isgoing down and that consumers have less the capital to make large investments.

2. Stock market is down for both Europe and US, mainly due to the news.

3. GBP fell against all major currencies yesterday.

4. Technically, the GBP look for another day of fall to the support line at 2.0270 and 2.0200. Again, the attempt togo above 2.04500 failed and that offer and suggested the super resistance line.

5. My personal view:
Key figures released yesterday has pushed the GBP down, technically, the GBP has moved side way and it is now looking for a clear trend. Most likely, BoE will reduce interest rate next month. With most EUR and GBP make high against the dollars, the intention to weaken the currencies is there. EUR hit high, but failed to clear 1.430.

On the US side, all words about the economy is that there will be pending recession, the dollars has weakened and that helped to cushion US export.

Technically, CCI showed down and has been side way. A good formation to wait is for CCI to either clear BB mean line or to go below -150 to get into a oversold condition.

I will favour a sell today, with support at EMA55 on the daily chart. Attempt to break it is good before EMA100. It's time for GBP to make some clear trend.