24 Nov 2009

GBP/USD Analysis:
The dollar continued to show its weakness. Traders are starting to look at the fundamentals which drive currency markets, namely the interest rate differential. If the ECB is getting ready to exit its stimulus programs then this is a sign that interest rates will remain at 1% and possibly move higher by early next year. This would make the Euro a more attractive investment than the Dollar because the Fed is not set to raise interest rates until at least mid-2010.

U.S. existing home sales report came out better than expected. This stopped the decline in the Dollar as it indicated the economy may be stronger than previously thought. Dow also climbed 1% adding more than 133 points.

The pound as a result halt its climb yesterday at around 1.665 and retrace back below 1.60. Naturally, it create again a resistance at 1.666/68 region.

This afternoon we have 3 news from the UK. BBA Mortgage Approvals, Prelim Business Investment and Inflation Report Hearings all reported at 1730hrs SGT. The former 2 is expected to be better than expected or at least better than the previous report. Mervyn King and his associates go to parliament and talk about the inflation situation, and about the economy in general. In his last appearance in parliament, King sent the Pound way down.

Counter acting at the US news, which are at 2300hrs SGT on Consumer Confidence and HPI.

As such, tecnically the pound is expected to be range bound. Technically within 1.648and 1.662.

Trade Plan Suggestion: Trade bounds between 1.648 region for long and short at 1.662 region.