Yesterday was a quiet day in Foreign Exchange trading, to follow the
eventful week that is always the first one of the month. Today Janet Yellen,
the new chair of the US Federal Reserve, visits Congress to give her monetary
policy report. She is not expected to say anything momentous but market
participants will be keen to compare and contrast her style with that of her
predecessor.
We continue to watch and wait with regard to the currency pairs we
trade. The Aussie and the Kiwi look like they might be ready for a dip after a
good run up, but we will wait for confirmation. Gold benefited from a return to
the market of Chinese buyers after the Lunar New Year holidays and again, it is
now looking a little toppy. For the Euro and sterling, much will depend on
developments in the US
and the fate of the US dollar in the medium term. The Japanese Yen is showing
signs of life, in the sense that the USDJPY pair might be coming off a recent
low. This means the Japanese currency could be weakening again. So is the Swiss
franc.
Trade thoughts: The British
pound
After the second disappointing US Non Farm payrolls report in a row, the
GBPUSD pair went into reverse. The dotted lines on the four-hour chart above
show a successful trade that was stopped out at a significant support level,
after half the position had been taken off when it was in substantial profit.
Then the pair started to rise again in the wake of the latest NFP report, last
Friday.
On the long term (monthly chart), sterling is, as noted previously, at a
resistance level which if broken would allow it to rise quite smartly. The
fundamentals in the UK
are steadily improving so if the US dollar fails to perform, perhaps because of
a market perception that QE is either to be continued for longer, or its demise
is being already priced in, then this scenario could indeed play out. In any
event a sustained breach of the 200 period Simple Moving Average (SMA) on the
monthly chart (below) would be key.
Important disclaimer: None
of the commentary here constitutes investment advice. It is for educational
purposes only. There are many countervailing views on the way the market might
move and no one, not us or anyone else, can foretell the future. You should
only trade with money you can afford to lose. It is important that you make
money management and the control of risk the cornerstones of all your trading
activity.
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