Wild Swing on GBP/USD

Written by Research | 24 October 2009

give-up gains ! 

As Cable ( GBP/USD ) fell back 175 pips at least from the high levels of 1.6695 which over-shot our objective of 1.6550 and went down to a low price of 1.6412. The UK economy failed to emerge from the recession in the third quarter and the Pound faced some heavier pressure towards the US markt sessions.

Some of the speculative investors held back expectations for higher interest rates in the near distant future. With the GBP/USD retracement from its this week's advance movment and may even go lower at GBP/USD 1.6280 - 1.6350 to test for short-term support which used to be the previous resistance on the previous up movement. It is currently working at the price level of 1.6377 as of this writing and also may have triggered some recent long bias positions held from the past few days of aggressively moving higher.

The 3Q GDP reading showed economic activity in the U.K. unexpectedly contracted 0.4% from the three-months. As the economy remains in recession, the Bank of England is likely to hold throughout the remainder of the year.

The Euro advanced to a fresh yearly high of 1.5063 during the Asian session ; which was just about our objective in the Market View report Vol. 22 dated the 19th of October 2009. And basically remained bid throughout the European trading session. And is now still holding at the 1.5035 prices and not affected with the corrective move of the GBP/USD due tot the economic report which really hammered the Pound lower rapidly. U.S. dollar price action was mixed overnight following the slew of economic data from Europe, and the USD Index is expected to increase volatility throughout the U.S. sessions and may also spill over its sentiments next week. With a lower USDX earlier session at 75.08; it has been resisting breaking its inital suport at the 74.90 which we also stated in our Market View Vol. 22.

Although, there should be a long consolidation period before the US dollar Index may find some sort of relief. As most traders have been anticipating this correction. And the Fed Chairman Ben Bernanke is scheduled to speak on financial regulation at the Boston Fed conference.

Meanwhile, economists forecast existing home sales in the U.S. to increase 4.9% in September to reach an annualized pace of 5.35M, which would be the highest since August 2007, and the data is likely to be reinforce an improved outlook for the US economy.