On
July 14th last we had
occasion to remark that the Euro against the pound, EURGBP, had reached the
lower end of its trading channel, which is resolutely in the downward direction due to the sustained strength of the British
unit (and weakness in EUR), and that taking further short trades in the dominant trend direction
might be unwise for the time being.
In
the event, the exchange rate has continued to track the lower end of that
particular channel, with only a small retrace making itself felt. The pound
against the US dollar, GBPUSD, on the other hand, has retraced nicely, as can
be seen in the daily chart above. This move got a further impetus yesterday on
the back of rather poor retail sales figures out of the UK. We will, of course,
monitor this situation to be ready for a possible move back into GBPUSD when the
rising channel bottom has been reached, provided always that our indicators,
and the fundamental situation, do not indicate a trend change at that time.
Getting ready for another move up?
The UK retail sales figures yesterday represented only one reading. Policy is not made
on this basis, as central banks across the world have consistently demonstrated.
Whether it is employment figures in the US, or sales figures in the UK, it is
the trend that makes itself apparent over time that really matters. The UK
economy is showing its growing strength in many indicators, and the Bank of
England is still on track to consider a rise in base interest rates before too
long.
While
there are no certainties in Foreign Exchange trading, the probabilities still
favor the continuation of the rising trend in Sterling.
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