British Pound Strengthens after Debate

The GBP USD strengthened overnight after opinion pollsshowed the Conservative Party won last night’s debate in the U.K. This newsboosted the British Pound because it diminished the chances of a hungparliament.

The GBP USD strengthened overnight after opinion pollsshowed the Conservative Party won last night’s debate in the U.K. This newsboosted the British Pound because it diminished the chances of a hungparliament.

Technically, the British Pound turned the main trend down onthe daily chart on Wednesday. Thursday’s action looked more like a retracementof the recent break rather than a change in trend. The key to higher marketswill be whether the Pound can trade through the retracement zone at 1.5310 to1.5354.

The EUR USD is moving higher as traders are more optimisticthat a multiyear rescue package agreement would soon be reached between Greece, theEuropean Union and the International Monetary Fund.

Traders remain cautious about the long side, however,because sovereign debt problems similar to Greece’scan flare up in Spain, Portugal or Ireland. Although the EuropeanUnion and the International Monetary Fund are working out a loan bailoutagreement, traders are likely to remain skeptical about the Euro until thedetails of the plan are revealed. News is also circulating that Moody’sInvestors Services was preparing to lower Greece’s debt rating severalnotches.

Technically, the charts indicate that a rally to 1.3402 to1.3471 is likely over the next day or two.

Stronger demand for riskier assets is helping to drive the USDJPY higher. Expectations are for the Yen to weaken over the near-term due togreater demand for higher risk assets and Japan’s huge budget deficit.Traders may also be pricing in the possibility that Japanese debt maydowngraded. Upside momentum could return today which will drive this market tothe April high at 94.77.

The USD CAD is holding flat overnight. Despite higherequity, gold and crude oil prices, traders are a little nervous today about thelong side after BoC Governor Mark Carney said a strong Canadian Dollar may haveimpact on inflation or monetary policy. A strong currency tends to flatteninflation while reducing foreign demand for Canadian exports.

Institutions have been buying the USD CAD the last two timesit traded under parity, if they pull their bids the next time down, look for anacceleration to the downside. Aggressivetraders have to be careful about buying into parity.

The AUD USD is trading higher overnight as traders increasetheir bets for an interest rate hike by the Reserve Bank of Australia onMay 4th. The recent report showing a doubling of inflation during the lastquarter may be deciding factor for the policymakers.

Technically, the Aussie should encounter some Gann angleresistance at .9317. Overcoming this angle should set up a further rally to theswing top at .9337. Although taking out this price will officially turn themain trend to up, a move through the angle will generate a similar signal.

The NZD USD continues to accelerate to the upside as tradersanticipate an interest rate hike sooner than previously expected. Although thenext Reserve Bank of New Zealand meeting isn’t until June 9th,traders believe the RBNZ will increase rates before the Fed.

Technically, this market is in breakout mode with nothing inthe way to stop the rally. New support has been established at .7199.

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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