4 Aug 2009

GU Analysis:
Wow, breakout of 1.67 and ended almost 1.7!

The reasons were due to better than expected results in both the UK Manufacturing PMI (hitting for the first time above 50%) and better US Construction spending (from -ve to +ve), better US Cars sales. The last piece od news trigger the pound during the US morning to hit peaks after new peaks, only to settle after noon trading.

The more than good sentiments will continue. S&P and DOW rallied. This monring Asian market will rally too.

In the afternoon, UK will release Construction PMI at 1630hrs SGT and a series of US news at 2030hrs SGT. In particular, Core PCE Price Index. But the critical one is at 2200hrs SGT on US Pending Homes Sales.

Signs of manufacturing has recovered, confidence is back, housing will be next in line then unemployment. These are indicators that the economy is getting on track.

So how high can pound go, given so many better than expected good news? Support is now at 1.67. Immediate resistance is at 1.69-1.702 the physiology mark before the big up above 1.7. 1.82 is the 50% fib retracement of 2.0156-1.3491.

Looking at the hour chart, pound may did a retracement then swing back towards 1.7 and beyond. Retracement level using Fib from 1.69883 and 1.6697, we have 1.6920, 1.6877 (EMA21), 1.6842 then 1.6808 (EMA55).

CCI looked overbought, indicating a retracement to take place.

Trend: Up given the good news. Expect retracement and some consolidation at Fib Retrecement level.