Monday, February 10, 2014

A quiet day at the office | Trading thoughts: The British pound

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.

No comments:

Post a Comment