10 Nov 2009

GBP/USD Analysis:
A very nice combination in development. First the equity market, with the Dow breaking and staying above 10200 points gaining more than 2% last night. Second the Euro hit 1.5 again. Third, crude near $80 a barrel and gold hit new high of above $1100.

Is the dollar a gonna? The global economy has definately recover, but the demand for dollars is not there. Is there an unstated underlying that people are replacing the dollars with other currencies? It look like investors are gorging on anything other than the U.S. dollar as a new feast of fourth quarter risk appetite gets underway.

U.K. retailers posted their strongest October sales growth since 2002, House prices in England and Wales rose last month at their strongest rate in almost three years, buoyed by tight supply and record low interest rates. Good news to strengthen the pound.

A lot more Euro news this afternoon. This will see the Euro break and rebound off 1.500 for this week. Also British trade balance is traditionally negative – meaning there’s a deficit. This deficit has slightly squeezed in recent months, edging down to 6.2 billion pounds. It’s predicted to edge down some more, to 6.1 billion. A smaller deficit will help the Pound. Published at 1730 SGT.

On technical analysis, the pound found new support at 1.668. It did its first retracement to this support and tested it last night coming down from yesterday high of 1.684. It may test this support again and with the CCI edging and nearing +150, the pound may be trading within 1.69 and 1.668 today.

Breaking 1.69, together with the Euro clearing 1.500, will give the pound a boost towards 1.7, confirming the contiuation in U.S dollars selling.

Trade plan suggestion: As the CCI has punch out of the BB, its not quite safe to jump into the long. Of course the sentiments look right for a long position. Wait for retracement to EMA55 or EMA100 and take small profit.