13 Nov 2007

1. News: Manufacturers raised output prices by their highest annual amount in 12 years, as they pushed through the cost of higher crude oil and food prices on to customers. Rate-setters at the Bank of England will be concerned about the sharp rises in both input and output prices ahead of the release of its quarterly inflation report on Wednesday.

Today, The Tuesday UK consumer inflation data will be important in determining the near-term pricing pressures and the degree of flexibility that the bank will have to respond to fears over a slowdown in growth. A low reading for inflation would make it much more likely that the bank would sanction a December interest rate cut to offset the credit crunch.

2. Stock Market: The Dow closes below 13,000. Wall Street ratcheted its way through a fractious session Monday before finally closing lower on expectations of further fallout from the ongoing credit crisis. The Dow Jones industrials, up more than 100 points during the day, ended below 13,000 for the first time since August. On the contracry, European market closes mixed.

3. Major Currencies: All major currencies make a retracement against the dollars yesterday.

4. Technicals: With yesterday, the formation of three black crows was completed. Using a 1 day chart, the GBP hit the EMA55. It touches the 2.0560 - 2.0620 region that for the last 2 months it has been trying to break.

5. Personal Assessment: There are no big news in the US that will affect the GBP greatly today. Of course with yesterday Dow dip, it may follow through the momentum for another day of dip or consolidation, giving the fact that 13,000 is a good support line, which DOW has been trying to break this year.

UK has a CCI annoucement 1730hrs.
The FTSE close at 6337 yesterday,which the FTSE failed to push through resistance at the confluence of the 100 and 200 SMAs at 6,426/35 on Friday, indicating that equities are lacking bullish momentum. Nevertheless, the index stopped short of falling through the 50 percent retracement level of 5,821.7. The reversal took place.

With 3 days of black crows, the expectation will be mixed today.

My expectation is for the GBP to do a consolidation today, bouncing off the EMA55 on the daily chart, forming a B-wave, before the creation of a C-wave towards EMA200 on the daily chart.

I will place a breakout south at 2.0500, with support at 2.0200. Alternatively, the break out north is at 2.0720