23 July 2009

GBPUSD Analysis:
The stock market is still the barometer for risk.

When the U.S. stock market does well, forex traders seem more willing to take riskier, higher-yielding trades---which tends to send the U.S. dollar (USD) and the Japanese yen (JPY) lower.

When the U.S. stock market does poorly, forex traders seem more likely to take safer, lower-yielding trades---which tends to send the USD and the JPY higher.

In both Asis and Europe market, the dollar was strengthening all day. It remained firm throughout and during the testimony of Bernanke before the Financial Services committee.

Once Ben’s testimony concluded, the Dollar weakened. DOW also surged in early trading, which helped to erase almost all of the Dollar’s gains.

The pound retraced after reaching high of 1.6505.

Today, the concerned is whether the UK economic recovery is stalling and that the U.K. doesn’t have enough money to provide anymore stimulus without blowing out the budget. It will be a wait and see situation until the preliminary Second Quarter GDP number is released on Friday.

At the technical side, 1.652 is a strong resistance, else it would render the pound to range between 1.652 and 1.632.

Breaking 1.652 will bring the pound to the next high at 1.663.

Breaking 1.632 will bring the pound lower to 1.620.

But my expectation for today is that pound will attempt 1.652 because of the Retatil Sales report at 1630SGT. It fell last time by 0.6%, and is predicted to rise by 0.4%.

At 2200SGT, the US will release its Existing Homes Sales.

Trend: ??