British Pound Soars on Speculation

The GBP USD soared 1 percent Tuesday morning boosted byspeculation that U.K.insurer Prudential may withdraw its takeover bid of AIA.

The GBP USD soared 1 percent Tuesday morning boosted byspeculation that U.K.insurer Prudential may withdraw its takeover bid of AIA. This news combinedwith renewed interest in the Euro and diminished risk aversion is helping topush the British Pound to within striking distance of a key 50% level at1.4810.

The EUR USD remains down at the mid-session but well off itslow. Early Monday night, the Euro took out May’s low at 1.2143 but failed toattract fresh selling pressure. This market was trading lower primarily on thenews of the resignation of German President Kohler and on concerns that Francemay become the latest country to face sovereign debt issues or a debt reductionby the credit agencies.

The inability to attract new shorts and a turnaround in U.S. equitymarkets helped to encourage a mid-day short-covering rally. The main trend isdown, but the chart pattern suggests that bearish sentiment may be shifting. Atrade through 1.2453 will turn the main trend to up.

The USD CHF is in a position to post a daily closing pricereversal top after failing to break out to the upside. Watch for a lower closetoday to set up the formation. In addition to the potential top formation, thismarket is set up to change the main trend to down on a trade through the lastswing bottom at 1.1484.

With the U.S.stock markets wavering between plus and minus, the USD JPY is taking on asimilar pattern. The bigger picture suggests that 91.61 could become a keyresistance level if the equity markets weaken. This 50% price was tested onMonday and was rejected. Regaining this level will be a sign of strength with92.41 the next upside target.

Early this morning the Bank of Canada announced a 25 basispoint interest rate hike and the market hardly moved. This indicated that themain focus of traders at this time is aversion to risk. Overnight, lower crudeoil and equity prices helped to drive up demand for the USD CAD. Once equitymarkets settled and rallied, the Canadian Dollar began to make its move. Atthis time, the Dollar/CAD is trying to establish support inside a retracementzone at 1.0481 to 1.0394. Holding this zone could trigger a retracement to1.0633 over the near-term.

Overnight the Reserve Bank of Australia announced that it wouldleave interest rates unchanged. This was a sign that it is concerned that aslowdown in the global economic market would pressure the Australian economy.In addition earlier weakness in the global equity markets helped drive downdemand for higher yielding currencies. After testing a minor 50% level at.8308, the AUD USD is mounting a small comeback rally. A strong finish in U.S.equity markets could put this currency pair back on track for a test of a major50% retracement price at .8727.

The NZD USD is trading higher after testing and rejecting a50% support level at .6706. The currentchart pattern suggests that upside momentum is building which could change thetrend to up on the daily chart on a move through the last swing top at .6862.Investor sentiment is playing a major role in today’s trading action. Higherequity and commodity prices could convince traders to take on more risk. Thisshift in sentiment will help support the Kiwi.

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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