British Pound on the Mend after New Government is Formed

The GBP USD is advancing on speculation that a newgovernment has been formed. Traders are celebrating the possibility that anagreement has been reached between the Conservative party and the LiberalDemocrats. It can also be surmised that the British Pound is up because PrimeMinister Gordon Brown’s Labour Party is finished ruling the U.K.

The GBP USD is advancing on speculation that a newgovernment has been formed. Traders are celebrating the possibility that anagreement has been reached between the Conservative party and the LiberalDemocrats. It can also be surmised that the British Pound is up because PrimeMinister Gordon Brown’s Labour Party is finished ruling the U.K.

The formation of a new government is seen as a positive forthe British Pound at this time because it provides clarity to an almost diresituation. For weeks the Sterlinghas been succumbing to selling pressure due to the possibility of a hungparliament. This situation would have created a problem because it would havemade it virtually impossible for the new government to enact the austere fiscalmeasures needed to balance the budget and reduce the country’s debt.

The clarity provided by the “new coalition” between theConservatives and the Liberal Democrats comes at an important time because ofthe events taking place in the Euro Zone. The formation of a new government ishelping to provide the psychological boost the British Pound needs to reversethe current down trend.

Technically, the GBP USD is rallying after successfullytesting a minor retracement zone at 1.4765 to 1.4695. The subsequent bottomingaction and upside reversal has helped form a secondary higher bottom. Based onthe main range of 1.5523 to 1.4474, traders should look for a short-coveringrally to the first 50% retracement level at 1.4998. Upside momentum could drivethis market into the next level at 1.5122.

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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