15 Nov 2007

1. News: The BoE's latest forecasts showed annual inflation would be at 2.00 pct in two years' time, based on market forecasts that interest rates will fall to 5.2 pct by early 2009 and 5.1 pct by the end of 2009.If interest rates stay as they are at 5.75 pct, however, CPI inflation will fall to around 1.75 pct, the report showed. The pound weakened in expectation of an interest rate cut.

In the US, Core prices, which exclude volatile food and energy prices, were unchanged in October. The last time core prices rose more slowly was in March, when they fell 0.1 pct. This push further the pound down.

Tonight, there will be news from the US on Unemployment claims and crude oil inventories. In expectation, Government data released Thursday is forecast to show crude-oil inventories fell last week for the fourth straight period.

2. Stock Market: Europe market did a mini rally yesterday, with the FSTS running up by more than 1%. On the contrary, US market was mainly still yesterday, but ended in red during the last hour of trading.

3. Major Currencies: With exception from GBP, the rest of the major curreny did relatively small movement, forming doji.

4. Technicals: GBP came down to form the C-wave. From the 1 day chart, WMA5 cleared EMA21 and will attempt to clear EMA55. However, bearing in mind that 2.0600 used to be a resistance line for months, before a breakout happened late last month.

5. Personal Assessment: With all the negative news from the UK coming to an end and with major reporting now coming from the US, I will expect some form of consolidation to happen. Yes the formation of the C-wave is there, and indicator from CCI continue to show the potential for GBP to go south till a oversold position. However, 2.0600 and EMA55 (1 day chart) may prove to be a support line. Therefore, watch out for any such formation in CCI or a rebound of WMA5 on EMA55 (1 day) and should there be a need, please abandon short position.