20 Mar 2014; GBPUSD

20 Mar 2014; GBPUSD

From last night FOMC, Janet Yellen set the tone for a time period of 6 months after the bond buying program, first half of 2015. The effect of an intended interest rate raise imply a better performing economy. The Fed has been buying back the bonds it issue after 2008 or what it called qualitative easing. Rates has been kept at zero, but stubbornly, the unemployment indicator has not been going done.

The words by Yellen sent the pound a big swing downwards - an indication of a USD strengthening for an implied better to come US economy. Is is going to be short lived before the pound rebound again?

UK economy is doing well, so if the expectation of the UK economy performing better, the pound will rebound.

From the technical, the pound is support by its daily EMA100, down from EMA55 after last night Fed speech. Support at EMA55 at 1.660 is breached and now support is at 1.6500.

Looking at the CCI(14) on the daily basis, the trend is upward. In fact the pound has been over bought. The indicator which is used to buy or sell in the longer term, first indicate a buy at last Friday at price 1.6650. As such if you look at it, it is a good time still to buy, probably around 1.6500 and 1.6530. Resistance is at 1.6600.

Watch out for today US unemployment claims at 2030hrs SGT and existing Homes sales at 2200hrs SGT. This will indicate what is the actual ground effect of the US economy - whether has it really on the road to recovery as the Fed claim so that interest rate should start raising.