4 June 2009

GU Analysis:
Is yesterday fall a retracement or a change in trend?

In UK all the good news with Serive PMI showed a better than expected results. Tonight BoE at 1900hrs, will announce their plans. How the British pound responds to the rate decision will likely depend on the BOE’s stance in their policy statement. Signs that the BOE may increase their gilt purchases could weigh heavily on the British pound, especially against the euro, while the opposite (steady rates, no QE expansion) could provide a boost to the UK’s currency, though the markets are just as likely to show no reaction in this case. (from DailyFx)

The Dow and commodities market did a reversal, for either profit taking or showing signs of uncomfortable evidences that the growth may not be as expected. Wall Street fell after the disappointing figures were released from manufacturing PMI and factory output. Federal Reserve Chairman Ben Bernanke, meanwhile, said Wednesday that the economy will begin growing later this year, but the improvement will be slight. He has shifted his focus on debts rather than his "green shoots" theory.

Technically, yesterday's candle mark a bearish engulfment. CCI pointed down, but may be short live as the indicator came down not from the top of the BB, but below. But pound has been overbought for a long time, it may need a breather. Using Fib retracement, support is at 1.612, then 1.578.

Looking at the 1hour chat, GU is now supported at 1.622 and may confine in the trading range of 1.622 and 1.646. A break up from 1.646 will show that it is only a short retracement and GU will find resistance at 1.665, then may journeyed towards its target 1.7.

Trend: Still bullish with assumption that yesterday trade was just a technical retracement.