New Election Poll Underpins British Pound

The GBP USD finished higher on Monday in mostly range boundtrading in New York.Recent U.K.economic data has supported the Pound, but gains have been limited by politicaluncertainty.

The GBP USD finished higher on Monday in mostly range boundtrading in New York.Recent U.K.economic data has supported the Pound, but gains have been limited by politicaluncertainty. This outlook changed overnight following the release of a new pollshowing that the main opposition Conservative Party is gaining ground. Thisoutcome will reduce the chances of a hung parliament and increases the chancesthat a solution may be hammered out regarding the U.K. budget deficit.

Overall, the U.S. Dollar traded mixed against the majorcurrencies but held steady through out the day session. The slow volatilitystems from the lack of fresh U.S.economic news and the lack of news regarding Greece and its budget woes. Forextraders were also keeping things tight ahead of the upcoming Bank of Japanmeeting and the Reserve Bank of New Zealand and Federal Reserve meetings onApril 28th.

The Bank of Japan is expected to keep interest ratesunchanged at historically low levels. The market moving news will be how theBoJ assesses the economy and inflation. Demand for higher risk assets, namelythe U.S.stock market, has been pressuring the Yen lately. Deflation has alsocontributed to the weakness. Traders will be looking for a rosier outlook forthe economy and hints of inflation from the BoJ policy makers.

One sticking point between the government and the BoJ hasbeen the topic of quantitative easing or stimulus. The government continues topressure the central bank for expanded stimulus. While the BoJ may pass onexpansion by limiting its purchase of Japanese Government Bonds, it mayconsider lengthening the maturities to appease the government officials. At this time it doesn’t look like the Bank ofJapan will do anything to encourage traders to buy the Yen so the USD JPYuptrend is likely to continue as long as U.S. equity markets keep rising.

The NZD USD was the big gainer today. Although the ReserveBank of New Zealand is expected to keep interest rates unchanged at 2.50%, tradersfeel that the RBNZ may be moving more quickly toward increasing interest rates25 basis points sooner than previously estimated. Recent better than expectedeconomic reports are most likely moving the central bank closer to hiking ratesbefore the previously mentioned second half of the economy.

The AUD USD closed lower on Monday after an early attempt torally failed. Stronger demand for higher risk assets helped the Aussieovernight, but U.S. stockmarket weakness pressured this Forex pair after the New York mid-session. Traders are expressinguncertainty about whether recent economic information supports another ratehike by the Reserve Bank of Australiain May. A breakout over .9337 will be a strong indication that rates will behiked once again. A trade through an uptrending Gann angle at .9250 couldtrigger a technical sell-off.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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